June 1, 2010 at 7:24 pm #2649
4 drums cokerParticipant
Outlet For Canadian Gas Critical With Rise Of U.S. Shale Production
By Richard Macedo
The Kitimat LNG Inc. liquefaction project will be a critical relief valve for producers in Western Canada who are disadvantaged by higher costs when compared to some of the key American shale gas plays for several reasons, including the fact the plays are further from key demand centres.
Mike Graham, president of Encana Corporation’s Canadian operations and Mike Dawson, president of the Canadian Society for Unconventional Gas (CSUG), addressed the market issue at a JuneWarren-Nickle’s Energy Group/Oilweek speaker series event on North American shale gas, and underscored its importance in later interviews with the Bulletin.
In particular, access to the growing Asian market will be vital, they said.
In a recent key development, EOG Resources Canada Inc. agreed to acquire the shares of Galveston LNG Inc., a private Calgary-based company whose subsidiary, Kitimat LNG, is helping to develop the export facility.
Kitimat LNG owns 49% of the planned terminal to be located at Bish Cove, near the Port of Kitimat, about 652 kilometres north of Vancouver. On Jan. 13, Apache Corporation announced an agreement with Kitimat LNG to acquire 51% of the planned Kitimat project. Apache will be the operator.
“It is tough for Western Canada,” Graham said. “It is a heck of a lot more expensive in Canada, be it facilities, pipelines, drilling and completions, logistics.
“We’re at the end of the pipe so we’ve got to pay more for transportation.
“But, we’ve got the resource,” he added. “We’ve got the potential. We’ve got to be able to compete…and the relief valve will be Kitimat.”
Graham didn’t say whether Encana has had discussions with Apache or EOG about sending some of the company’s Horn River supply to Kitimat, when asked.
“(But) the Asians…are very interested in taking a lot of that supply,” he said. “They’re looking at security of supply and they’re seeing Western Canada as a great place to get LNG.”
During his speech, Graham noted part of the advantage will come through the oil-linked price via the Japan Crude Cocktail (JCC).
“It is incredible to see the growth that’s going on (in Asia),” he said. “We (would) have the ability to actually export natural gas off the West Coast.
“We think we can compete with Australia.”
Dawson said that if it doesn’t embrace the alternatives, whether new uses for the fuel or tapping overseas markets, Western Canada gas “is going to be in for a very long, protracted time of decline.
“It’s very difficult for us to compete,” he said. “The only reason we’re competitive right now in some… jurisdictions is because of the bottlenecking that is occurring because of pipeline infrastructure capacity constraints within that southeast supply area of the U.S., the Haynesville and the Fayetteville.
“But those companies, they recognize that the market in North America predominately is in the northeastern United States and so they’re working really hard, spending hundreds of millions of dollars to get rid of those bottlenecks,” Dawson added. “If we’re going to survive, we’ve really got to look at alternative markets because the U.S. is not going to sit there and say ‘we’ll take Canada’s share.’ They’ll buy it wherever they can from the cheapest place.” . . .
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