Just like oil, we need to get natural gas to tidewater

From the Top of the Pile

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I had a lengthy conversation the other day with a gentleman who grew up just half an hour down the highway from me, and who was finishing up his degree in the University of Saskatchewan’s mechanical engineering program the year I started.

I joked that when you flunk out of engineering, 25 years later you get to interview the people who passed.

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Jason Skehar is the president and CEO of Bonavista Energy, a sizeable Calgary-based oil and gas company, with an emphasis on gas. It was an enlightening conversation, because, while I’ve spent 11 years now writing principally about the oil business in Saskatchewan, I haven’t spent much time at all on the natural gas side of the industry.

That’s because in Saskatchewan, the natural gas business is all but dead. I wrote its obituary, so to speak, in a column a while back. Oh, we still produce natural gas, but most of it these days is what is known as “associated gas,” meaning the gas that comes up with oil. Targeted natural gas, which means drilling wells specifically to produce gas, and only gas, had its heyday over a decade ago, when we used to drill over 2,000 gas wells a year in Saskatchewan and gas was around $10 per MMBTU (million British Thermal Units). Now, with a decade of gas around $2.25 per MMBTU, no one drills for it in this province anymore.

But Bonavista does drill for gas in Alberta. And they have had times where their product was effectively worthless.  Skehar said, “We’ve experienced points in time over the last two years whereby natural gas pricing at AECO was worthless, or as you just pointed out, negative. We’re paying the consumer to take our natural gas away. They’ve fluctuated from that level to two dollars a gigajoule, certainly a more normalized price level, in the matter of a week.”

No business can last that way for long.

The problem? Lack of egress for the gas we’re producing, in part because the United States, our only customer outside our own domestic consumption, is now producing huge amounts of gas of its own. In fact, they are producing so much they are currently exporting around six BCF (billions of cubic feet) of gas per day, and that number is growing rapidly.

Skehar noted as an example, back in 2010, both the U.S. and Canada began on the same foot, with the potential to provide the rest of the world with a clean and reliable source of energy – natural gas. “Ten years later, Canada will not be shipping a molecule of gas off our shores as LNG, and our neighbours to the south will be shipping in excess of 10 BCF per day,” he said.

Over the next 15 years, he said, the expectation is a doubling of volume of liquified natural gas (LNG), natural gas that is cooled to the point of being a liquid, put on ships and exported. And we’re not part of it. Despite nearly 20 projects having been proposed for the West Coast, we haven’t got anything anywhere close to being done.

The world price for LNG had been $10-12 per MMBTU, but now it’s $5-6. While that may not seem all that great, it’s a more than double what these days is considered a decent, profitable level for Canadian production. (It’s not going to get anyone drilling for gas in Saskatchewan anytime soon, but it works for Alberta and British Columbia.)

This is where the natural gas CEO is singing from the same choir book as the typical oil CEO. We need to get out product to tidewater, now. We could be getting a lot more for it, dramatically improving our economy, if we could just get it on a ship and sold to someone overseas, preferably places like China and India.

It’s an argument we don’t hear that often. It’s not anywhere close to the national discussion like oil pipelines have become. We hear dribs and drabs about it, like the massive Kitimat project that was canceled, and the LNG Canada project that, now, finally, has been approved, but it doesn’t get anywhere near the attention the oil pipeline debates have received.

To me, it seems there is just one more thing that demonstrates the need for a national energy corridor, from coast to coast, where proponents can build not just oil pipelines and electrical transmission lines, but natural gas pipelines, too. Companies like Bonavista need the ability to get their product to market; overseas markets, not just North American markets.

Our conversation reinforced in my mind the growing notion of “Can’tada.” We have hamstrung ourselves so much in this decade that it seems we, as a nation, can’t accomplish anything of significance. We can’t build oil export pipelines. We dithered for a decade on LNG while the Americans lapped us.

I lay this at the feet of the same federal government who has ensured we still don’t have new fighter planes, nor have we even cut steel on our new fleet of ships that will be the bulk of our navy going forward. It’s more and more of the same, never ending story. Delay, delay, delay. Don’t do anything.

Opportunity is passing us by, and the world will not wait for us.

Will the next federal election make a difference? Will whoever forms government finally get us accomplishing something, anything, in an expedient manner?

Or should we simply change our name to Can’tada?

Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@sasktel.net.

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