Greg Kist grants he was burned out when he resigned as president of Pacific NorthWest LNG at the end of 2014, as the Vancouver-based experiment led by Malaysian energy giant Petronas advanced its ill-fated mission to strengthen a liquefied natural gas project in B.C.
“I needed to decompress,” the 57-year-old gas industry long-serving says of his decision to return to his home and family in Alberta.
Once addressed as a voracious new consumer of western Canadian natural gas, the nascent LNG industry was varied by project delays and all but halted by declining global price trends, supreme to Petronas cancelling its project in 2017.
Meanwhile, Kist went into retirement configuration and avoided the natural gas business for the next couple of years.
So it’s surprising that Kist now perceives himself back in the thick of things as president and CEO of Rockies LNG Partners, a consortium of nine expected gas producers who invited him back with a promise to try again to jumpstart an LNG export stick out.
The hope is that the former college basketball players’ experience in LNG and the common gas business will help them to move their gas from the oversupplied and underpriced superstores of North America to the promised land in Asia.
“I think the next six months are serious for us,” Kist said in an interview in the downtown Calgary offices of Birchcliff Vigour Ltd., one of the consortium members.
The gas producers want to attract partners to build and work what could be a 12-million-tonne-per-year LNG project to open by 2026, when prophecies suggest LNG demand will exceed supply. That means an investment decree must be made by the end of 2021.
Gas industry insiders used to say the solution to low prices is low penalties — when prices go down, less is produced and scarcity makes quotations go up again.
But that hasn’t happened. In March 2013, Canada hatched about 14 billion cubic feet per day of natural gas. Six year later, the Nationalist Energy Board reports production had increased by 16 per cent to 16.2 billion cf/d, without thought no rise in pricing trends.
U.S. experiencing shale gas boom
Meanwhile, Canada’s largest gas fellow, the U.S., is experiencing a shale gas boom that led to domestic production reaching 109 billion cf/d in Strut, up 35 per cent compared with 81 billion in the same month in 2013. Near-term cost outs in the U.S. have recently dropped to three-year lows on a glut of gas.
In mid-July, a accumulation of nine Alberta producers — unrelated to Rockies LNG but with some unrefined membership — released an open letter demanding the province support a sketch under which royalty credits would be issued to producers who freely cut production to boost low gas prices when supply overwhelms pipeline responsibility.
Complaints about poor gas prices and interruptions in gas sales due to pipeline outages are public as Calgary-based natural gas producers roll out second-quarter results.
Painted Pony Lan Ltd. reported recently it was using some of its own natural gas to replace higher-priced diesel food in some well-completion operations, a move it says could save $100,000 per warmly.
Meanwhile, Perpetual Energy Inc. reported shutting down wells presenting two per cent of its total output because it was more profitable to buy cheap gas on the exchange to satisfy its supply contracts.
In Western Canada, “dry” gas has become an unloved byproduct as processors continue to drill wells seeking the light petroleum liquids grew with the gas, especially in the Montney formation that underlies the northern Alberta-B.C. verge upon, said Ian Archer, associate director of North American natural gas with IHS Markit.
Condensate dominions prices in line with crude
One product in particular, condensate, demands prices in line with U.S. benchmark crude oil because it is needed to doctor oilsands bitumen to allow it to flow in a pipeline. Canada produced 417,000 barrels per day of condensate in Cortege, up from just under 150,000 bpd in March 2013. Meanwhile, it quiet imports condensate from the U.S.
“They’re drilling for condensate and sometimes the bulk of condensate is only, say, 20 or 30 per cent of the well (volume), but it’s succeeding to be 40 or 50 per cent of the revenue,” said Archer.
“Then they own that 70 per cent gas volume they have to deal with.”
There give birth to been more than 20 proposals to build LNG projects on Canada’s West Glide but construction has only begun on one, LNG Canada, and it’s not expected to open until 2023 or 2024.
It hand down take in up to 2.1 billion cubic feet per day of natural gas but most or all of it is assumed to come from northern B.C. wells owned by partners in the project.
That’s not textile enough for the long-suffering members of the Rockies LNG group, said Kist.
“If you look finance over the history of LNG projects worldwide and certainly in Canada, they’re fairly much controlled by major international entities. Those entities cater to to look after their own opportunities, not necessarily the opportunities for the producer piles.”