LNG hubs to make strange bedfellows
Feb 7, 2012 – 7:05 PM ET | Last Updated: Feb 8, 2012 8:45 AM ET
Osaka Gas Co. via Bloomberg News
A liquefied natural gas (LNG) tanker.
As plans to build a natural gas liquefaction (LNG) hub on the British Columbia coast move closer to reality this year, the market is buzzing with talk of new partnerships and takeovers involving Western Canadian gas producers, potentially sweeping up big names like Encana Corp.
The trend has the makings of the next big thing and could shake up the natural gas sector in Western Canada, where prices are languishing at disastrous levels and cash-strapped producers are motivated to make deals.
Oil majors like Royal Dutch Shell Group PLC and national oil companies like Malaysia’s Petronas are evaluating as many as five plans to build terminals in the Kitimat area to export LNG to Asian markets and will need to secure supplies to keep them full.
So far, they have secured about 17.8 trillion cubic feet (tcf) of resources in Western Canada, but will need 39 tcf to meet current plans, CIBC World Markets estimates in a recent report.
Companies like Encana, Talisman Energy Inc., Progress Energy Resources Corp., Painted Pony Petroleum Ltd., Paramount Resources Ltd. and NuVista Energy Ltd. could be sought after partners or even takeout candidates.
Canada’s West Coast and the U.S. Gulf of Mexico are seen as the two hot spots in the race to build North American export capacity, a nascent business made possible by the discovery of massive shale gas deposits.
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