One Way or Another - Western Canadian Gas Producers Still Looking for a Way Out

Natural gas producers in Western Canada are still struggling to find new markets to replace those they’ve lost to Marcellus/Utica producers in recent years. It hasn’t been easy, and they certainly haven’t been helped by the high cost of transporting gas to Ontario and the Upper Midwest, by the failure of LNG export projects in British Columbia to advance, or by the collapse of oil prices that has slowed growth in the oil sands sector (a huge consumer of gas). Despite the gloom, though, there are at least some rays of hope. TransCanada is considering big cuts in pipeline tolls in exchange for commitments to long-term deals. It’s also possible that at least one BC LNG export project may become a reality by the early 2020s. And some gas producers in the Montney shale region in the Canadian Rockies are focusing on areas where they also can produce vast amounts of condensate for use as diluent in the nearby oil sands region. Today, we provide an update on the ongoing (and often frustrating) efforts to expand gas production in BC and Alberta.

 

CLIPPERDATA: FIRST ETHANE LOADING AT HOUSTON TERMINAL ABORTED On Monday, we discussed the impending first export of Gulf Coast ethane out of the new Enterprise Morgan’s Point facility (see The Yellow Rose of Texas).   Now, according to our friends at ClipperData, that cargo has been aborted.  See alert below. The JS Ineos Insight has left its anchoring point offshore Galveston and is heading out of the Gulf. The vessel was to take on the first cargo of ethane to be shipped from the Enterprise terminal at Morgan's Point on the southern end of the port of Houston. The vessel anchored in the Galveston area on July 29 and left the area on August 3.  Aborting the loading suggests that the terminal is not ready.   The JS Ineos Insight may now be heading to Marcus Hook to take on ethane at the East Coast terminal. Another Ineos ship, the JS Ineos Inspiration is already at Marcus Hook to load. The other two ethane ships in the same class (27,500 cubic meters) are offloading in Norway. The disposition of these ships means that the first loading in Houston will be significantly delayed. Ineos could use a smaller vessel to pick up ethane in Houston, but of the eight vessels in this smaller class of tanker, seven are trading in the Middle East and Asia, and only one is available in the Americas.

The Montney shale play in northeastern British Columbia/northwestern Alberta and the Duvernay shale play in west-central Alberta together represent an extraordinary hydrocarbon resource –– some say they could be another Marcellus/Utica, with favorable economics for producing vast quantities of natural gas, natural gas liquids and light crude/condensate. But as we described a while back in Montney’s Python –– Western Canadian Shale Is Being Squeezed, development of the Montney and the Duvernay has been slowed to a crawl by competition from U.S. shale producers, especially (as it turns out) from the Marcellus and Utica themselves. A good bit of the gas produced in the Canadian Rockies is consumed there, mostly for power generation and to produce steam for in situ oil sands production. (See We Are the Champions for more on that technology.) Gas not consumed in Alberta/BC has three primary outlets: the Pacific Northwest, the Midwest, and eastern Canada and the U.S. Northeast.