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Canada gas producers hold line on spending
Gary Park For Petroleum News
Spending on natural gas exploration in Canada next year is unlikely to change from this year’s bleak performance and, if anything, could be further scaled back, company executives told a Peters & Co. conference Sept. 11.
EnCana and Canadian Natural Resources, the leading producers, say they have no plans to increase their budgets for 2008, while Talisman Energy and Husky Energy hint they could further trim their programs.
This bleak outlook comes amid the lowest rig utilization rates in Canada since 2002 and a 20 percent drop in Canadian gas prices since July.
EnCana Executive Vice President Mike Graham said the big independent’s 2008 budget will likely be similar to 2007, with a slim chance it might be a “bit higher.” But he said EnCana is “moderately bullish” on gas prices because of its belief that North America faces a supply crunch.
“It’s tough to find gas and it’s tough to replace it,” Graham said.
To that end, he said EnCana is on the lookout to buy assets that are adjacent to its major operating areas, targeting junior firms who are suffering from low gas prices.
Gas exploration costs high Canadian Natural Vice Chairman John Langille said it is difficult to divert money from oil to gas when gas exploration costs are so high in comparison to commodity prices. His company cut its gas spending in half this year to about C$1 billion from last year’s C$2 billion and expects to hold that line into 2008.
Talisman’s outgoing Chief Executive Officer Jim Buckee said his firm expects to reduce its exploration budget to C$1.5 billion in 2008 from this year’s C$2.2 billion.
Husky’s Chief Operating Officer Robert Peabody said his company is more likely to shift spending to other parts of its portfolio to “get more bang for our buck.”
But he did offer one glimmer of long-term hope, saying Husky is “quietly positioning” itself to connect gas from Atlantic Canada’s offshore to U.S. northeastern markets, although that is unlikely to happen before 2012.
He said Husky has identified 1.7 trillion cubic feet of gas reserves in the Jeanne d’Arc basin offshore Newfoundland and aims to establish 4-5 tcf to “create a material business” capable of serving U.S. customers.
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