Investors still paying big money for gas plants despite LNG uncertainty

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Despite falling gas prices and increasing competition from the US, a recent article by Business in Vancouver asserts that the Montney Formation is so rich in both gas and natural gas liquids — light oil, condensate, butane and propane — that it makes natural gas production there more economically viable than in most other regions.

The article, using files from the Daily Oil Bulletin, goes into detail about natural gas developments around the northeastern B.C. region, and highlights that these facilities are natural gas processing plants, as construction on a single LNG plant in B.C. has yet to take place.

Veresen is building two new gas processing plants in the Dawson Creek area, at a cost of $1.5 billion and as part of the agreement with the Cutbank Ridge Partnership.

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And, earlier this month, Veresen and Cutbank Ridge approved the construction of a third plant: the $930-million Saturn 2.

Altogether, this makes the total investment about $2.5 billion.

Steven Paget, an analyst with FirstEnergy Capital Corp., calls them some of the biggest gas plants in Western Canada.

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Meanwhile, AltaGas plans to begin operations at its $325-million Townsend gas processing plant near Fort St. John sometime later this year — part of a roughly $1-billion investment the company is planning to make in B.C.

The company also has plans to build a new liquids separation facility nearby, at a cost from $100 million to $150 million. That plant would process natural liquids into products like propane and condensate.

Elsewhere in B.C., there are plans for a new propane export facility at the Ridley Island terminal in Prince Rupert, at a cost of $400 million to $500 million. AltaGas expects to make a final investment decision later this year.

Manager of B.C. operations for the Canadian Association of Petroleum Producers, Geoff Morrison, says production in B.C. has been growing while it is on the decline in the rest of the country.

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Although a new market for gas from an LNG industry would increase demand and prices for natural gas producers, the article says investments being made in the Montney are not necessarily dependent on it.

Earlier this month, gas analyst Dulles Wang told a Canadian Energy Research Institute conference that he thought Petronas’ Pacific NorthWest LNG will proceed and be producing by 2022.

Western Canadian gas production has been falling, due to competition from the U.S., but he predicts that by 2025, a “second wave” of North American LNG projects will drive up more demand for gas from western Canada.

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