Investors ‘more comfortable’ putting money into gas projects in Iraq than Quebec: banker – by Nicolas Van Praet (National Post – October 29, 2013)

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Canada’s oil and gas industry is “losing the war” against anti-hydrocarbon activism as the balance of power tilts in favour of project opponents, says the head of Quebec’s Oil and Gas Association.

Limits-to-growth and other social movements that sprouted out of such events as Niagara Falls, N.Y.’s Love Canal disaster in the 1970s have been “hammering away” at industry and government over three decades, Michael Binnion said Monday in an interview at the association’s annual meeting in Montreal.

“I think they are doing some good, getting us focused on what we could do better and should do better,” Mr. Binnion said. “But when we let the power to oppose become bigger than the power to propose, we have a problem in society. And [that is happening].”

From pipeline proposals in British Columbia to efforts to develop Quebec’s shale gas deposits in the St. Lawrence lowlands, there is no shortage of oil and gas-related projects that have drawn the attacks of activists in Canada. Even the least problematic are now assailed, Mr. Binnion said.

One investment banker added that investors are “more comfortable” putting money into oil and gas projects in Iraq and Africa than into Quebec projects.

“We have a real problem in our industry,” Mr. Binnion said. “We are losing the war and we are losing the winning conditions that we have taken for granted for 100 years or more. [By] winning conditions I mean that you have a political culture and a political environment where your projects are welcomed and succeed subject to being good projects.

“We do not have those conditions in Quebec. Even a very good project three years ago was not welcomed. And I think we’re seeing across the country some very good projects that are not welcome.”

Mr. Binnion’s comments come one year after his predecessor as Quebec Oil and Gas Association president, former Quebec premier Lucien Bouchard, shared similar thoughts on the growing power of environmental activists and the increasing difficulty companies have winning social licence for their resource development plans. “Society has invented a new religion,” Mr. Bouchard said in October 2012, namely the belief that man is wrecking the planet and the world should return to a more natural state.

Mr. Bouchard is a lawyer and former politician. Mr. Binnion, as chief executive officer of Calgary-based exploration and production company Questerre Energy Corp., is a business executive. But their fear is the same: That billions of dollars worth of economic value and spinoff taxation will lie stranded in Canada, and particularly in Quebec, if current trends continue.

Quebec has immense pools of oil and natural gas, but almost all of it remains untapped. There’s an estimated 155 trillion cubic feet (tcf) of natural gas lodged in shale rock alone, of which about one-fifth is recoverable. Questerre’s share is pegged at 4.43 tcf.

When the Quebec government imposed a de facto moratorium on shale gas drilling and fracturing two years ago after significant public protest over environmental and safety concerns, several producers active in the province decamped. Millions in market capitalization were destroyed.

What remains today is a collection of junior companies waiting for the government go-ahead to drill, on a largely exploratory basis, for conventional and unconventional oil on Anticosti Island and elsewhere; and a shale gas sector that’s given up on near-term development and moved on.

“Investors are very used to the risk of exploration,” said Thomas Korsdalen of Norwegian investment bank Pareto Securities, which helped Questerre raise about $200-million for projects including shale gas in Quebec. “I mean often times you don’t find the gas or oil. But we have never experienced this: That you find what you are looking for [and then it doesn’t get developed]. You find a pot of gold and you’re not allowed to touch it.”

Mr. Korsdalen said Pareto is involved in raising money for oil companies working in Iraq, Kurdistan and Africa. “That feels a lot more comfortable [for investors] than putting in any more money in Quebec right now,” he said. “I think it would be very hard for me today to go out and raise any money for any project in Quebec.”

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