As natural gas prices collapse, producers pin hopes on Asia – by Claudia Cattaneo (National Post – April 12, 2012)

The National Post is Canada’s second largest national paper.

For natural gas producers in Western Canada, these are the best of times and the worst of times.
 
On the bright side, the opening of a new export market for liquefied gas from the British Columbia coast is so close they can smell it. A consortium led by Royal Dutch Shell PLC seemed close Wednesday to a go-ahead decision on a $12.35-billion gas liquefaction terminal in Kitimat, while another proposed LNG project secured a federal export permit. The developments provide solid support for the takeoff of an LNG industry that promises richer prices for Canadian gas from Asian consumers, a reason to develop massive shale gas deposits that are now stranded, and fuel merger and acquisition activity.

But a dark side is also haunting the consortium. North American gas prices sank below US$2 per million British thermal units in New York Wednesday, the lowest point in a decade and far below what it costs to produce it, threatening gas producers’ ability to survive long enough to capture the pot of gold on the other side of the Pacific.
 
According to a report in the Tokyo-based Nikkei business daily Wednesday, Shell and partners Mitsubishi Corp., China National Petroleum Corp. and Korea Gas Corp. are close to completing terms on a project to start shipping gas around 2020 at an annual rate of 12 million tonnes.
 
Stakes in the joint venture have not been decided, but a broad agreement is expected as early as this month, after which the four companies will start seeking approval from local authorities.
 
Edward Kallio, director of gas consulting at Ziff Energy Group in Calgary, said the Shell-led project would likely proceed in two stages, each with the capacity to export about 1.7 billion cubic feet a day.

“We really need access to those markets, otherwise there is going to be a lot of pain here,” he said. “We have fantastic productive potential in our basin, primarily in the Horn River, Liard and Cordova shales, and in the Montney, that won’t be realized until we can tap non-traditional markets.”
 
Also Wednesday, BC LNG Export Co-operative, a partnership of the Kitimat-based Haisla Nation and Houston-baed LNG Partners, received a 20-year export permit from the federal government. The group intends to ship 1.8 million tonnes of liquefied natural gas a year to markets in Asia starting late in 2013 or early in 2014. Its floating facility on Douglas Channel would be the first to export Canadian gas to markets outside the United States, the only current market for Canadian gas due to the limits of pipelines.
 
“Canada is well positioned to grow as a global energy superpower,” Joe Oliver, Canada’s natural resources minister, said in a statement. “Projects such as this will show the world that we are serious about getting our energy resources to market.”

For the rest of this article, please go to the National Post website: http://business.financialpost.com/2012/04/11/natural-gas-producers-pin-hopes-on-asian-market-as-prices-sink/