Developing export markets for Canada’s abundance of natural gas reserves was a key theme at Hart Energy’s recently held Developing Unconventional Gas Conference and Exhibition in Calgary, Alberta, Canada. Efforts to construct and supply liquefied natural gas (LNG) export terminals are seen as the remedy for the country’s ultra-low gas production netbacks.
For many producers, Asian markets look like the best export targets. “Asian gas demand is 20 billion cubic feet (Bcf) per day, but that could increase to 35 Bcf per day by 2020,” said panelist Edward Kallio, director of gas consulting to Ziff Energy Group. “Chinese growth is exploding. By 2020, it will overtake Korea as the second largest importer of LNG.”
Asian markets are looking to North America for LNG exports because “it is cheap and successful,” he said. Regarding competition for the Asian markets, Kallio noted that several LNG-export projects, worth about 7 Bcf per day in total, have been proposed in Russia, Iran and Nigeria. “The gas is there, but will it ship to markets? The projects are very speculative,” he said.
The Kitimat LNG export project in British Columbia, Canada, is the best bet for getting Canadian gas to foreign markets, said panelist Janine McArdle, senior vice president of gas monetization for Apache Corp. Apache Canada Ltd., EOG Resources Canada Inc. and Encana Corp. are joint partners, and Apache will operate the facility.
“Demand from the U.S. for Canadian natural gas has dropped,” said McArdle. “The one-trick pony of having only one market for gas won’t work anymore.” Apache sees the Asian markets growing at a steady 6.6% into 2020 and that region looks attractive as an export target market, she said. In fact, Japan imported about 10.6 Bcf per day in 2011, South Korea imported 3.8 Bcf per day and China is trending toward a five-fold increase in demand by 2020.
Also, although China has its own shale-gas basins, one of the largest basins is very dry, so fracturing shale rock would be a huge challenge. The second basin sits under a high-density urban area, so most of that shale gas will be consumed in the area.
The Kitimat project will include opportunities for upstream operators from western Canada basins, third-party midstream operators to gather and process the gas, and downstream constructors of storage tanks and jetties, she said. The dedicated major transmission pipeline, Pacific Trails Pipeline, will be sized to move enough gas to Kitimat to provide feedstock for two liquefaction trains.
Despite a bright outlook for the project, it is not without its challenges, she said. “KBR Inc. is the main builder, and they are doing a great job but it can be tough. Last year, the area to be cleared saw four feet of snow in one day. We are working through that. It’s just what major projects go through.”
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