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LNG terminals planned for West Coast have enough gas to go around: executives

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CALGARY - Northeastern British Columbia's shale fields contain more than enough natural gas to feed a myriad of West Coast export terminals in the works, energy executives said at an industry conference Monday.

But some say collaboration may be necessary to ensure the gas makes its way across the Pacific in the most cost-effective way possible.

"I think if you look at Southeast Asia's demand, we could handle multiple projects off the West Coast," said Michael Culbert, chief executive of Progress Energy Resources Corp. (TSX:PRQ).

"When you look at the potential of the Montney or the Horn River, and then additional supplies of even conventional gas in Alberta and B.C., could we support three or four projects at a total of four (billion cubic feet) a day?" Culbert said. "Sure."

Earlier this month, Progress announced a $1.07-billion deal with Malaysian energy giant Petronas, which is set to close during the third quarter.

The Canadian company is selling a half-interest in three properties in the Montney region of northeastern B.C. to Petronas. The companies are also studying the feasibility of a liquefied natural gas, or LNG, plant somewhere on the West Coast, in which the gas would be condensed into a liquid and shipped overseas by tanker.

U.S. energy companies Apache Corp. (NYSE:APA) and EOG Resources Inc. (NYSE:EOG) have teamed up with Canadian natural gas heavyweight Encana Corp. (TSX:ECA) to build an LNG plant at Kitimat, B.C. That project is the most advanced of the lot, and is winding its way through regulators.

"We think the more the merrier," said Mike Graham executive vice-president of Encana's Canadian division.

"There's been a couple announced as well in the Gulf Coast in the U.S. I think North America can support a lot of liquefaction."

Natural gas fetches a price two or three times higher in Asia than it does in North America, as enormous volumes continue to gush into that oversupplied market.

Building export capacity not only benefits Encana's bottom line, but those of all North American natural gas players, Graham told reporters.

"We think by investing in LNG that it will lift the whole price complex in North America."

Royal Dutch Shell PLC is looking into possibly building an LNG plant in Prince Rupert, B.C. Shell's Canadian unit is one of the country's largest gas producers.

Other major B.C. gas producers have said they're amenable to entering the LNG scene, though no concrete plans have been announced.

Nexen Inc. (TSX:NXY) is on the hunt for a partner to help develop its vast holdings in the Horn River Basin. LNG expertise would be attractive in a partner, but Nexen is open to a variety of marketing strategies for its gas, chief executive Marvin Romanow said.

"I think you want to think about treating your market access as a portfolio, not as a single killer strategy."

Talisman Energy Inc. (TSX:TLM) recently sold a half-interest in two of its B.C. shale properties to South Africa's Sasol. Those companies are examining a gas-to-liquids plant, which would churn out transportation fuel.

There's room for further partnerships in the Montney, though nothing is in the works at the moment, said chief executive John Manzoni.

"In a lighter-touch way, we're also looking at LNG options up and down the West Coast, because I think we have to."

Progress's Culbert said he'd like to see co-operation between the companies building the terminals, and the provincial and federal governments that regulate those projects.

For instance, if several different pipelines are heading in the same direction, the regulatory process can be streamlined to accommodate all of them at once.

"This can be a well-orchestrated process," Culbert said.

Penn West Exploration has a joint-venture deal for its natural gas assets in northeastern British Columbia with Japan's Mitsubishi. The two aren't working on an LNG venture at the moment, but Penn West president Murray Nunns said he expects that's Mitsubishi's ultimate aim.

Nunns said he sees the various LNG proposals joining forces at some point.

"The scale of the initial projects at a (billion cubic feet) or two probably isn't suitable relative to the size of the resource in Western Canada," he told reporters.

"I think in the end, it may only end up as one or two facilities but I think they'll be substantially larger than what's been considered."

Consolidation, he said, is "natural."

"I think in any other jurisdiction where you've seen export of natural gas, it tends to be a fractionated playing field initially, and then starts to come back together."

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