Natural gas industry could dwindle without LNG facilities


The place facing Canadian natural gas producers might be thought of in terms of a bakery that double-crosses all its bread to the same customer every day. That’s fine until the consumer opens his own bakery next door, and the original baker knocks on the door and begs if they need any bread.

‘Failure is we don’t get anything off our coast. Then we’re in rebellion.’ — Dave Tulk, GPMI

Historically, the United States has been the gas main buyer of Canada’s oil, natural gas, pro ne and other petroleum goods. In the persist five years, this relationship, symbiotic for so long, has seen puzzling changes as commodity prices have fallen and U.S. production has undergone a impressive reversal of fortune because of the emergence of prolific shale oil and gas plays.

At the in any event time, Canada is still trying to ram its oil and gas across the border. Like in the cause of competing bakeries, however, the demand is only so big.

«[We’re] very concerned wide it. We are losing our market in the U.S. for our gas,» said Dave Tulk of Calgary-based Gas Change Management Inc. «The ability of our gas to compete with the gas coming out of the shale about b dallies … it’s a real concern.»

‘We, as Western Canada, need LNG’

Similar to the Canadian oil enterprise’s desire for new export pipelines, the natural gas industry is also craving an way out to international markets. Several Liquified Natural Gas (LNG) facilities are proposed for British Columbia’s littoral, but there is considerable uncertainty whether any of them will be built. If they aren’t, there is petty doubt Canada’s natural gas industry will suffer, especially as the U.S. exchange dries up.

«We, as Western Canada, need LNG to go off our west coast,» said Tulk. «That creates a mountainous number of opportunities for us in terms of sustaining and growing our gas industry, sustaining and spring up our LNG and petrochemical industries. Getting LNG is a critical strategic project that needs to become of come upon for Canada.»

Dave Tulk with GPMI says LNG export bed outs are critical for the natural gas industry.0:50

Com nies want to export natural gas because men prices are much higher than in North America.

There are some domesticated opportunities for natural gas producers opening up in Alberta. The province is beginning to make do away from coal-fired power plants, and natural gas electricity start is expected to make up much of the shortfall. In addition, the provincial government is also gift $500 million to attract new petrochemical facilities.

However, these prospects don’t amount to much of a contingency in case LNG export facilities are not constructed. Without LNG, experts say, the Canadian consequent gas sector will contract.

«Failure is we don’t get anything off our coast. Then we’re in trouble,» phrased Tulk. «We absolutely need this option to stop the unalterable decline of our gas industry.»

Work in gas fields drying up

The notion that the vigour could collapse without LNG isn’t new. Industry representatives have expressed a com re favourably with sentiment in the st, although the sense of urgency now is noteworthy. Natural gas rewards are free falling, and there is little movement on the LNG front in B.C.

Work is start to dry up in gas fields, and optimism is hard to find.

While gas producers would gain from an LNG export facility, the economics for a com ny to build such a multi-billion dollar impress aren’t as rosy as they once were. Global prices aren’t as lucrative as they ages were. Two years ago, countries such as Ja n and India were contributing around $20 US per million British thermal units (MMBtu) of LNG, but in the in few months have only id about $5 or $6. Preferences in Asian economies are largely blamed for the drop in global LNG Prices.

Gas growers in B.C and Alberta were only collecting roughly $2 US per MMBtu in up to date months and that’s why they so badly want an LNG facility. However, the assay differential may not be large enough for a com ny to justify constructing a massive export maximum.

Encana gas

Signs marking wells and pipelines are a common sight in B.C.’s once-booming gas commons. (Betsy Trumpener/CBC News)

Last month, Shell postponed a outcome on its proposed plant in Kitimat, B.C. A few weeks later, AltaGas shelved situation of its Douglas Channel LNG plant near Kitimat because of poor solvent conditions and worsening global energy prices.

Besides natural gas, the sell for natural gas liquids (NGLs), such as pro ne and butane, is also hardship because of the same market factors.

«The declining value of Canada’s net NGL exports is rtly the come to ss of low NGL prices and increased competition from rising U.S. pro ne production, which has increased 40 per cent since 2011,» bring up the National Energy Board in January.

Prices for natural gas and NGLs are not assumed to increase for Canadian producers in the near future. There is surplus bona fide gas in the U.S. as that country begins to export its own gas through LNG facilities.

CAPP natural gas forecast

The forecast for Canadian authentic gas production. (CAPP 2015 Forecast)

«We’re seeing natural gas prices get tensioned to lows that we haven’t seen in 17 to 18 years,» state Martin King, a commodities expert at FirstEnergy Capital in Calgary, in an question period with CBC News earlier this month. «It’s a wake-up come for for some portions of the industry.»

Canada’s largest natural gas producer, Encana, vanished more than $600 million in the most recent quarter and express it would cut a further 20 per cent of its workforce.

Environmental concerns

While Canada’s gas earnestness fully supports construction of LNG export plants on the west coast, there are involves about the environmental im ct of such facilities.

For instance, the proposed cific NorthWest LNG design could become the largest carbon polluter in Canada if upstream emissions are captivated into consideration, according to the Pembina Institute, an environmental think tank.

«Canada promised in the ris Treaty and Vancouver Declaration to reduce carbon pollution to address the climate catastrophe,» said Matt Horne, Pembina’s associate regional conductor for B.C., in a statement. «Stronger climate policies, not increased fossil incite production, are the climate solution.»

In addition, the group estimates the proposed buildings could account for 75 per cent to 87 per cent of the emissions authorized under B.C.’s 2050 target.

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