The head of one of Canada’s largest geophysics consulting companies says the decision by Pacific NorthWest LNG (PNW LNG) to not go ahead with its proposed project in Port Edward, British Columbia is unlikely to have an immediate impact but will inevitably lead to less drilling and development.
Brad Hayes, president of Calgary-based Petrel Robertson Consulting, said activity in parts of the province won’t be significantly affected, particularly the liquids-rich Montney.
That’s because operators there such as Seven Generations Energy—which has found markets in Canada, the U.S. and elsewhere for its gas and liquids—have been developing the play without the assumption LNG will go ahead on the West Coast.
However, activity in the once hot Horn River Basin and other plays will inevitably slow down, without a large LNG plant to send their production to.
“There will still be activity in B.C., particularly in the Montney, because of better economics,” said Hayes. “But in areas like the Horn River, activity will be affected, because it’s further away from markets and it’s dry gas.”
Although Crown land sales in the province won’t be directly affected immediately, Hayes said that will happen eventually, as producers face fewer marketing options for their gas.
At one point, as many as 20 LNG projects were being proposed for the B.C. coast, which would have created a market for billions of cubic feet of gas daily, but only one small plant is proceeding.
Crown sales so far this year in B.C. have been much stronger than last year, driven almost entirely by activity in the Montney.
The province brought in $70.28 million for 35,191 hectares for the first six months of 2017 compared to just $4.22 million for the same period last year.
However, Hayes points out that past land sales in the province were generating over $1 billion a year, when there was much optimism about LNG plants going ahead.
“In 2014, there was a piece of land in the Montney that went for $100 million,” he said.
Those days are likely long past, he said, as gas prices stay low and LNG projects aren’t proceeding.
However, eventually Hayes does think larger LNG projects will be developed on the B.C. coast.
“At some point the world will need that gas,” he said.
But he said there could be several years of lower Crown land sales in B.C. and subsequent lower drilling and development activity.
Producers will now be focused on the Montney, he said, since it is one of the few plays that is competitive with the Permian, the Marcellus and other gas plays in the U.S.