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Gearing up for shale surge National Energy Board OKs pipeline from Horn River, processing plant; line second feeding shale gas supplies from northeast BC Gary Park For Petroleum News
Canada’s energy regulator has given an added push to development of a shale gas region, which TransCanada forecasts will contribute 5 billion cubic feet per day by 2020, or about one-third of total current Canadian gas production.
The National Energy Board has approved a C$310 million pipeline from British Columbia’s Horn River play, designed to carry 630 million cubic feet per day by 2014, and a processing plant and associated facilities west of Dawson Creek, Alberta, coming onstream this October at 100 million cubic feet per day and doubling in size by February 2013.
TransCanada Chief Executive Officer Russ Girling said the 100-mile Horn River pipeline, which will feed into his company’s Nova gas gathering system, is the “second direct point of access to the growing shale gas supplies” in northeast British Columbia.
He said the new pipeline will offer customers reliable access to the Alberta network and, in turn, to downstream markets in Canada and the United States.
The first extension came onstream in December through TransCanada’s Groundbirch pipeline, a 1.1 bcf per day line from British Columbia’s Montney field which came into service in December.
The two projects underpin committed shipping contracts that are expected to reach 1.9 bcf per day, helping offset declining conventional volumes from the Western Canada Sedimentary basin.
Largest producers participating Horn River has attracted participation by all of the largest gas producers in Canada — Encana (which is working on partnerships with Korea Gas Corp. and China National Petroleum Corp.), Apache (a joint venture partner with Encana), EOG Resources, ExxonMobil, Canadian Natural Resources, Nexen and Devon Energy.
Apache and EOG are joint venture owners of the Kitimat LNG project, which hopes to gain access to Asian markets, where liquefied cargoes are priced on an oil equivalent base — currently about $10 per million British thermal units at a Brent oil price of $100 per barrel, compared with current Nymex gas prices of about $4.30.
Talisman and Sasol are exploring another option which would see Montney production converted into gasoline and other fuels.
Horn River called expensive Bill Gwozd, an analyst with Ziff Energy Services, is a strong backer of TransCanada’s upbeat view of Horn River, especially if there is an Asian market that will pay a price that is tied to oil.
But he also cautioned that Horn River is one of the most expensive shale plays in North America, posing a challenge for producers to break even at current gas prices, putting added pressure on the industry to gain access to offshore markets or extract greater value by using the gas as feedstock for petrochemicals.
The Dawson Creek facility will be built by Spectra Energy Transmission through its Westcoast Energy subsidiary, with raw gas for the plant being delivered through Spectra’s new upstream Bissette pipeline, which has been approved by the British Columbia Oil and Gas Commission.
The NEB said it was satisfied Westcoast had shown there was adequate supply, markets and contractual commitments and answered concerns raised by several participants in public hearings by ruling that the use of previously disturbed agricultural land would minimize the impact on wildlife and on aboriginal land.
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