Spectra Energy must not be a superstitious company.
After all, they chose Friday, July 13 for the official grand opening for their new Dawson Processing Plant, even though the facility actually began processing northeast British Columbia’s natural gas resources at the beginning of June.
“In northeast B.C., we have a massive, massive gas reserve,” said Doug Bloom, president of Spectra Energy Transmission West, discussing the need for the new plant. “So, we’re going to need a lot of gas processing plants. This is a very large plant.”
The daily capacity of the completed first phase of the project is 100 million cubic feet (mcf) of sales gas, but that will increase to 200 mcf after the completion of phase two, which is expected to be ready for the first quarter of 2013.
The facility is also equipped to capture natural gas liquids to sell to their customers.
Carbon dioxide (CO2) and hydrogen sulphide (H2S) is extracted from the raw natural gas produced in that area of Montney tight gas play and subsequently transported to Spectra’s McMahon Gas Plant via the South Peace Pipeline.
Sales gas is distributed by the NGTL Groundbirch Pipeline.
Currently, only Spectra’s own Bissette Pipeline supplies the processing plant with raw natural gas.
“We see it fitting well into the British Columbia grid,” Bloom continued. “Our company collects gas in our downstream pipeline system, which is a very good jumping off point, if you will, for serving markets, certainly in British Columbia.
“Our pipeline serves most of British Columbia. On any given day it serves 50 per cent of the [United States] Pacific Northwest market. We also have connections into Alberta that this plant is connected into. A pipeline that will serve the Alberta market and beyond.
“And, long-term, it certainly can connect into pipelines that can serve LNG (liquefied natural gas).”
LNG was a hot topic of discussion during the grand opening, thanks largely to the presence of Premier Christy Clark, who was eager to talk about Spectra’s role in achieving the LNG industry goals set out in her government’s Natural Gas Strategy that was launched this past winter.
“The future of natural gas in British Columbia is almost unlimited,” said Clark. “As we move to start shipping it overseas – liquefying it and shipping it overseas – it could become a trillion dollar industry.”
Clark discussed the LNG opportunity in terms of the relatively high Asian LNG price, which has been over $16 per million British thermal units (mmBtu) while the North American natural gas price has hovered around $2 per mmBtu because the former is more closely tied to oil price.
Although that Asian price fell from a high of $18 per mmBtu to just over $15 per mmBtu in late June thanks to strong supply, which is a possible signal of things to come as energy companies and resource-rich nations ramp up their LNG plans, Clark remains optimistic that B.C.’s natural gas sector will be able to seize the opportunity and turn a profit.
“In the longer term, you might see the price go down,” Clark admitted. “But that’s why we need to move on this opportunity as quickly as we can and lock up those long-term contracts. Because these contracts are done over decades.
“And the Japanese will sometimes do contracts that are 25 years. Will lock them in. Will lock in the price. And we need to do that quickly. And that’s part of the urgency on this.”
Clark saw the potential for LNG sales to Japan firsthand during a trade mission to Asia, when she saw government offices with all the lights off to conserve energy. Japan is presently experiencing an energy deficit of 30 per cent because the nuclear power plants were shut down following the Fukushima disaster of last year.
“We’re not putting all our eggs in one basket [with LNG],” she continued. “We’re focusing on forestry, we’re focusing on agriculture, and other industries as well. You go look at our Jobs Plan. There’s more than just the natural gas sector in that.
“But this is a sector in which there’s real urgency for us to move. We’ve got to get on this or we’re going to miss the boat. And the Americans will get ahead of us. So, we want to make this happen. It could be huge for our province.”
Canadian energy sector representatives, including Bloom, accompanied Clark on her latest trade mission to Asia with that goal in mind.
“Asian countries do business a little bit differently,” said Clark. “Government is intimately involved in lots of private sector decisions in a way that it isn’t here. So, what I do when I go on trade missions is I take private sector companies and I help them open doors for investment in our province.”
“There are a lot of things that the private sector can do on its own,” said Bloom, “but developing new markets in Asia is something we absolutely have to work with government on. And, frankly, it’s been critical.
“We’ve been on the two missions that Premier Clark led,” he continued. “I can tell you, we have had immense amount of follow-up with Asian companies coming here to Canada and meeting with us to talk about how we capitalize on the opportunity. So, they expect to see government working hand in hand with business.
“And it’s really vital what the premier and her team are doing. And we think it’s going to pay strong dividends for this province. So, it’s absolutely critical.”
Bloom can see Asia’s interest in Canadian LNG right in the backyard of the new processing plant.
“Encana’s a major producer and a major customer of ours at this gas processing plant,” he said. “Their joint venture partner, Mitsubishi, is going to be a very large player in this region. A great example of what the premier was just describing, the importance of developing the business connections with Asia. And Encana has done it with Mitsubishi. And this is going to be a vital area for them.”
Although not necessarily customers for the new plant, Bloom noted that Shell Canada and Progress Energy are also major players in the Montney play that are building strong ties with Asian companies.
“Shell has a huge landholding in this area,” he added. “And they’re going to be a very big player in British Columbia and likely in LNG as well. Progress is also in northeast B.C. They’re a little bit farther north of where we are now, but they have vast landholdings. Over 800,000 acres of land in the Montney play. And an enormous opportunity. And working with their partner, Petronas, as they’re going through the closing of the sale. Petronas is a massive player in the LNG market. So, again, another comment on the premier’s point about the criticality of developing new export markets.”
Still, observers might question the timing of the new facility considering the low natural gas prices and the recently falling price of natural gas liquids that have been so important to the recent success of companies such as Shell and Progress that have staked out solid positions in the liquids-rich Montney.
Indeed, the plant is only processing about 65 mcf of its 100 mcf capacity, while only moving one truck of liquids per day.
“You can’t time things to the month or the year where the market may be low or the market may be high or maybe somewhere in between,” said Bloom.
“We’ve been in this province for 55 years,” he continued. “This asset, we expect, will operate indefinitely. Our McMahon gas processing plant is now 55 years old and going strong. So, we’re not worried about whether gas prices are low or high or somewhere in between in any given year. We plan to be here for the long, long haul.”
Bloom noted that the long-term operation of the facility will require addressing workforce issues that plague the oil and gas industry as a whole.
“Because our company has been growing so rapidly the last number of years, we’ve had to continue increasing our employment and hiring people into the sector from other companies,” he explained.
“In fact, even from other sectors, like forestry in British Columbia, where there’s a lot of very well trained technical and trades people.”
Spectra has given employees the opportunity to move from other facilities to the Dawson processing plant, but Bloom admitted that that isn’t sufficient to meet the workforce needs of the facility.
“The need for workers in northern British Columbia is really critical,” said Bloom. “And, frankly, we’re building another gas processing plant up in the Fort Nelson area where we have really been short of workers. And we’ve had to bring in about 150 foreign workers to supplement the workforce in the construction camp. So, getting skilled workers up to the areas like northeast B.C. where the economy is just booming is key.
“And we’re going to have to really put our thinking caps on [to address] how we attract more people to this beautiful part of British Columbia.”