Alberta Turns Attention to Natural Gas Recovery
For the past 18 months or more, the Alberta government has been concentrating on how to improve market access for its oil producers. It’s now turning its attention to the province’s equally-beleaguered natural gas industry, which suffers from many of the same market access issues as the oil business, including insufficient pipeline take-away capacity and increased competition from the US, which used to be its major customer.
On December 10, the government released the report of a natural gas advisory panel struck in May 2018 to study the issue. And the same day, it acted on one of the panel’s key recommendations by creating a Liquefied Natural Gas (LNG) Investment Team to work directly with industry on reducing barriers for securing final investment decisions (FID) on export projects that will enhance the value of Alberta’s natural gas resources.
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“Whether we’re talking about oil or natural gas, the details are different but the story is the same,” Alberta energy minister Marg McCuaig-Boyd said. “Albertans are getting pennies on the dollar because we can’t get our resources to international markets, and our biggest customer has become our biggest competitor. We can’t sit on the fence like previous governments did. We must take the bull by the horns and fight for the full value of our natural gas.”
The investment team – Greg Stringham, former vice president, economics with the Canadian Association of Petroleum Producers and now principal of industry consultancy GS3 Strategies, and John Carruthers of the University of Calgary’s School of Public Policy – brings diverse experience and knowledge to the task, McCuaig-Boyd said.
Stringham and Carruthers will be meeting one-on-one with industry leaders to understand their needs and advise government on steps to advance final investment decisions on LNG projects. They are expected to report back to McCuaig-Boyd early next year.
The appointment of the investment team follows the release of the report of the natural gas advisory panel, Roadmap to Recovery: Reviving Alberta’s Natural Gas Industry.
The report outlines 48 recommendations to grow the natural gas sector, including ways to improve pipeline capacity, enhance regulatory standards and metrics, shorten time frames for project approvals, increase transparency and accountability, and set an overall vision for Canada’s natural gas industry. Government has accepted the report and will continue to consult with industry on priorities going forward.
“I want to thank Hal Kvisle, Brenda Kenny and Terrance Kutryk for this important work,” McCuaig-Boyd said. “It’s clear that Canada has taken a back seat when it comes to LNG development as our neighbours to the south move ahead at full speed. While the US has more than 20 projects under review or already operating, Canada only has one moving forward. We cannot afford to be left behind in this investment window – the time to act is now. The experience and knowledge of the investment team we have created will help us secure long-term LNG investments that will create lasting jobs and value for Albertans.”
Of immediate urgency, the panel notes in its report, is the need to “grow the pie” by improving market access for natural gas.
“We must intentionally and aggressively grow the natural gas industry in Alberta and pay particular attention to market access,” the report says. “Alberta’s natural gas reserves now rival the oil sands in terms of future economic potential. In a carbon-constrained future, the transition to lower carbon fuels will drive growth in natural gas use in North America and globally.”
In the near-term – within the next two years – Alberta should do what it can to see that a second world-scale LNG project on the west coast takes a positive FID by the end of 2020. And it should launch aggregate credit support pools so smaller gas producers can enter long-term pipeline commitments to move their production to markets, whether in North America or in the global LNG market.
In the medium-term – within five years – Alberta needs to renegotiate and modernise its regulatory compact with producers to maximise industry growth and achieve greater flexibility within the gas system by optimising the use of spare capacity on critical pipeline segments.
“Strong government support for environmentally responsible natural gas development is essential at a time when opposition to all forms of hydrocarbon energy is blocking our access to both continental and global natural gas markets,” the report says. “The Alberta government can play an important leadership role in bringing producers, pipeline companies, other provinces and the federal government to the table, to identify and implement long-term strategies for the development and marketing of our immense natural gas resources.”