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New LNG Projects promise a reduction of extreme price volatility and are good news for Western Canadian Producers – Maureen McCall


by Maureen McCall – EnergyNow Contributor

Dave Humphreys, Vice President Operations, Birchcliff Energy in his recent article in gastechinsights.com , described the impact of the price volatility that has dogged Alberta natural gas producers for years. “Alberta is a very pipeline constrained province (both oil and natural gas) which leads to extreme pricing volatility. Over the past several years, Alberta producers, have at times, paid to keep their gas flowing (I.E. AECO strip pricing was below zero $/GJ) on the TransCanada, Nova Gas Transmission Ltd (“NGTL”) system. Some companies had no choice but to keep their gas flowing in order to fulfil long term, physical, contract obligations. This consistent market volatility makes it very difficult for any producer to forecast cash flow and set annual capital budgets when daily pricing fluctuations range anywhere from zero (or negative) to $2.50/GJ and back down again, sometimes all within days of each other. It also forces many smaller producers to shut-in volumes to avoid uneconomic netbacks, which results in significant loss of cash flow.”

According to Humphreys , the recent approval of the LNG Canada project has created opportunity but also leaves a a gap for smaller & medium producers.

“The approval of the LNG Canada project in Kitimat, BC was great news however it may not immediately provide benefit to many small and intermediate Canadian producers. The large integrated multi-national owners of this project already have the dedicated reserves to supply feedstock for this project for many years to come. Hence the need for an additional sizeable LNG facility….In summary, the access to new markets via tidewater and the exporting of LNG will be key to the revitalization of the Western Canadian energy sector as we know it today.”

However, as Jean-Marie Dauger, President of GIIGNL the international association of LNG Importers has suggested, certain locations and destinations as well as long term partnerships advantage certain LNG projects over others.

“For LNG importers, long-term partnerships, destination and volume flexibility as well as the ability to optimize or arbitrage between Asian and European markets remain key. In China, in India and South East Asia, in particular, LNG’s environmental benefits and its versatility make it particularly attractive as a destination fuel for thermal power generation and cogeneration, in the industrial and commercial sectors as well as in a growing variety of fields like marine and road transportation.”

One Canadian LNG Project has chosen the location advantage of the East Coast- Pieridae Energy’s Goldboro LNG project in Nova Scotia.

Of all of the LNG projects in Canada, Goldboro LNG stands alone with all it’s permits, an offtake deal and a promise by a European Government to backstop construction loans in place as it seeks a new market for Alberta’s natural gas.

The plan is to establish a solid global market for Canadian natural gas for years to come, revitalizing the Western Canadian energy sector. For more on Goldboro LNG & Pieridae Energy, join us for a presentation by Martin Bélanger — Senior Vice President, Operations & Engineering at Pieridae Energy on how “Pieridae Energy is Poised To Be The First LNG Company to Market in Canada” Thursday May 16th 11:30- 1pm at The Calgary Petroleum Club. For tickets- go to – https://lnkd.in/gztHG3k

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