Natural gas prices reach dangerously low levels

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Erica Fisher

Erica is a reporter for Moose FM and energeticcity.ca in Fort St. John, B.C. She grew up in Victoria, B.C. and received her Bachelor's Degree in Journalism from Concordia University in Montreal, Quebec.

"In the longer term, if it doesn't come around, it's definitely going to hurt companies and see them selling or moving out or looking for foreign investment to help carry them through… any kind of strategy they can think of to survive."

The smaller, less established companies will likely be harder hit, while bigger players that can tap into other revenue streams will survive. It's not uncommon for bigger companies to drill a well and then cap it, knowing they they have the revenue to carry them through, and put those wells into production when gas prices come back around.

The decline has been developing for a few years now, since new drilling technologies came into play. Salkeld calls it a "double-edged sword", in that the new technologies, like fracking and directional drilling, that PSAC companies helped develop, have opened up production across North America. In addition, the U.S. is using the same technologies, taking away a customer, and creating a glut of natural gas on the continent.

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"New technologies have opened up far more reserves, I guess, for lack of a better term, and we don't have a market to sell it to. So we've got huge supply and no demand."

However, just because the demand for B.C. gas is dwindling in Canada and the U.S., that doesn't mean there aren't other markets worth exploring. The provincial government has taken a keen interest in markets in Asia, including China and India, and have plans for new liquefied natural gas plants in the north. Proposed pipelines like the Northern Gateway Project are intended to bring crude oil and condensate to Asian markets via Kitimat.

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A spokesperson for Minister of Energy and Mines Rich Coleman assures the province has, "made a commitment to the development of a liquefied natural gas export industry – to help the sector grow, diversify, and establish access to new markets with the demand for B.C.’s natural gas." Salkeld wants to expand to those southern hemisphere markets, where gas is currently being sold for around $14 per CFM (cubic feet per minute).

"It's simple business: you don't like having one customer. If we could open the doors to Asia and the southern hemisphere and sell our product there, the it's a win. It's a win for Western Canada, it's a win for B.C., Alberta, Saskatchewan, it's a win for Canada as a whole sort of thing."

Salkeld says $3.50 per CFM is at the very bottom edge of profitability for companies that have infrastructure in place, and that $6 – $7 is where both producers and consumers will be really happy. Although prices are close to rock bottom, he feels that they won't linger there too long.

"There's a general sense that it is going to come back; we're not talking 10 years before gas prices come back. It's going to be three, four, maybe sooner. There is a certain degree of optimism that it will come around, simply because the best thing for low gas prices is low gas prices."

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