Canada: Encana Optimistic About LNG Exports


Encana Corp. foresees a “renaissance” in natural gas prices once terminals begin to pop up along the West Coast to export the fuel to energy-hungry Asian markets, but others addressing an energy conference on Tuesday weren’t quite so enthusiastic.

We think that the prices are going to stay robust in Asia. You look today in Japan, it’s still $13 US (per 1,000 cubic feet) over there,” Mike Graham, who heads up Encana’s Canadian division, told the Peters & Co. event.

In three to five years, when LNG really starts to pick up in North America, I think you’ll see another renaissance in natural gas prices.”

The huge supplies of gas flowing out of shales throughout North America have been landlocked for some time, resulting in a major supply glut that has kept prices in the anemic $4 range US.

One of the ways Encana Canada’s largest gas producer, seeks to remedy the situation is to tap into Asian markets. It, along with U.S. partners Apache Corp. and EOG Resources Inc. are planning to build a liquefied natural gas terminal in Kitimat, B.C.

There, gas piped in from northeastern British Columbia will be converted into a liquid in extremely cold temperatures. In a liquid state, the liquefied gas, or LNG, can then be loaded onto specialized tankers and sent overseas.

China is going to consume just about all the natural gas that the world can give them. They’ve only got maybe (one billion cubic feet per day) of LNG now, but they’re looking to put in 10 and even grow from there,” said Graham.

I think it’s going to be very robust. I think it’s going to have a tendency to pull oil prices down, and have a tendency to pull natural gas prices up. It does look quite likely that maybe a few years outbound, I think the forward curve will start to reflect LNG over the next couple of years and things will get a bit more robust soon.”

John Langille, vice-chairman of Canadian Natural Resources Ltd. (said he’s not quite so gung-ho.

I’m not quite as bullish, I don’t think, as some of my peer group here in terms of what time-frame,” he said.

Canadian Natural has a large land position in northeastern B.C.’s shales, but has been focusing most of its attention on developing oil- properties in Western Canada and abroad. It has signalled no interest so far in jumping aboard the LNG bandwagon, though Langille said eventually the gas will have to find its way out of North America.

And that will happen, but it’s a five-year scenario before that happens,” he said.

John Dielwart, chief executive officer of Arc Resources Ltd. said he sees prices recovering, but to a somewhat underwhelming extent.

Where we thought we might get back to $6, $7, maybe $8 gas a couple of years ago, now we’re saying $6 will be a pretty good price,” he said.

So I think the level at which gas prices might recover, I would say, has been tempered in many of our views. But the ability to stay where we are now for an extended period of time, year after year after year, I just don’t think that’s on the table.”

But Dielwart said he’s optimistic about demand growth. In Arc’s own backyard — Alberta — more and more power plants are making the switch from carbon-spewing coal to natural gas.

An in terms of LNG, Asian countries are most interested in gas from B.C. because the travel distance across the Pacific is so much shorter than from the Middle East, for example.

We certainly haven’t done any joint ventures, but we certainly talked to a lot of parties who are coming through Calgary. I would say the traffic has increased in the post-Fukushima world,” said Dielwart, referring to the March disaster at the Fukushima Dai-ichi nuclear power plant in Japan.

I think it’s only going to become a growing and growing story and LNG will be going to Asia out of northeast B.C. in the not too distant future.

Original Article

Posted on September 14, 2011, in AMERICAS, Canada, LNG and tagged , , , , , , , . Bookmark the permalink. Comments Off on Canada: Encana Optimistic About LNG Exports.

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