Race for B.C.’s natural gas assets heats up – by Claudia Cattaneo (National Post – August 7, 2012)

The National Post is Canada’s second largest national paper.

While politicians argue over the risks and benefits of proposed oil sands pipelines crossing British Columbia, the market has tuned into a different fight. It’s about control of the province’s natural gas assets and could involve two oil heavy weights — Exxon Mobil Corp. and Royal Dutch Shell PLC.
 
Analysts say there are telltale signs the race to capture B.C.’s natural gas resources and to own liquefied natural gas (LNG) terminals on the northern coast is heating up.
 
The battle for intermediate gas producer Progress Energy Resources Corp. has left an unsuccessful suitor rumoured to be Exxon, a regulatory filing by Shell for the LNG Canada terminal that suggests it will need more resource to keep full, and the Kitimat LNG plant struggling to find long-term Asian buyers.
 
“I think that there are going to be big deals done in northeast British Columbia,” said Chris Theal, president and CEO of Kootenay Capital Management Corp., an energy hedge fund based in Calgary. Producers from Encana Corp. to Talisman Energy Inc., or their B.C. assets, could be in play, as well as the proposed Kitimat LNG plant owned by Apache Corp., Encana and EOG Resources Inc., he said.
 
“If [the unsuccessful bidder] is Exxon and they are not successful on Progress, then I would be willing to put money down on Exxon ultimately owning the Kitimat LNG facility … or at least operating it,” Mr. Theal said.

There is speculation the plant has yet to find a long-term buyer because it doesn’t have alternative secure supplies if it goes offline, a solution that could be provided by a company like Exxon, he said.
 
Andrew Potter, managing director of institutional research at CIBC World Markets, said companies looking to export LNG from Canada’s West Coast will need a lot of resources to advance their plans, and they are likely to secure it early.
 
“There is obviously a large buyer out there that after several attempts was unsuccessful at stealing Progress,” Mr. Potter said.
 
“I doubt that they are abandoning their LNG plans simply because they didn’t get PRQ. There is a chance they will come back again but more likely is that they look to other Montney resources, and there aren’t many LNG-sized assets out there. Keep in mind that for a two [billion cubic feet per day] LNG facility you need 19 tcf (19 trillion cubic feet) of resources. That is a lot.”

There has been speculation about consolidation involving B.C. natural-gas assets for some time. The B.C. coast has been gaining momentum in recent months as a top North American LNG export point as companies nail down plans with little controversy, unlike the mayhem involving oil export pipelines. Politicians and First Nations are generally supportive.
 
However, space on the rugged coast to build terminals is limited, and so are producers such as Progress with focused assets.

For the rest of this column, please go to the National Post website: http://business.financialpost.com/2012/08/07/race-for-b-c-s-natural-gas-assets-heats-up/