Natural gas resurgence unlikely any time soon

Despite weakened market, Progress and Spectra look to the long-term in presence, production

Natural gas may heat homes, but the market isn’t so hot right now.

That was the impression industry leaders gave during a panel discussion at an upstream natural gas forum hosted by the Northeast B.C. Resource Municipalities Coalition in Fort St. John on Nov. 25.

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The region is considered upstream in industry lingo because it’s where natural gas is drilled. And, according to Gary Weilinger, Spectra Energy’s vice-president of external affairs who sat on the panel, there is enough gas in Northeast B.C. to power all the homes in North America for the next 8,000 years. 

But despite this potential, right now “is not a great time for our business,” Weilinger said.

From left: Mark Fitzgerald of Progress Energy, Senator Richard Neufeld, Wouter de Klein of Shell, and Gary Weilinger of Spectra Energy appeared at a forum on the natural gas industry in Fort St. John last week. - William Stodalka

Any hope for a resurgence isn’t on the horizon.

In 2008, gas was trading between $7 and $13 per million BTUs, according to U.S. government statistics. In 2015, gas is trading between $2 and $3—and Weilinger doesn’t see it rising any time soon. 

“I can’t see us getting past four or five-dollar gas for the next decade, if not longer,” he said. 

“There’s no real market fundamentals that say we’ll ever see $10, or $11, or even $7 gas in the next few decades.” 

That means Spectra has had to adapt, he told the crowd, and find ways to reduce costs.

One of the ways Spectra is trying to change its operations is by moving its employees around, Weilinger said.

“We started to do that transition this spring, and we reduced our workforce significantly that is physically located in Vancouver, and relocated those roles either to the Charlie Lake office or in Calgary,” he said. 

“We can be a lot more efficient and effective if we put people that are supporting our operations closer to where the people are and the facilities are.”  

The company is “where they need to be” right now in terms of staff, Weilinger said, but it continues to look at its facilities and operations outside of Fort St. John and Calgary.

“In Calgary, we’re looking at hiring some people, and hiring some people in Fort St. John, and that’s positive,” he said. 

“What we’ve learned from other downturns is that we certainly don’t want to be hasty in making those decisions around (staff) reductions, because it’s very hard to get those skills back again. And, where we have made reductions in head count as a result of the current downturn, it’s been in the central office support-type functions, and not in field operations.”  

As for local service companies  that bid on Spectra contracts, Weilinger thought it would be “even better than it was.”

“We’re going to be a lot more co-ordinated, and the people who are actually procuring the work that we need, not only the services but the products, they are going to be working together as one team, as opposed to having many different functions,” he said. 

“It’s going to be a lot more consistent, and there’s going to be a lot more accountability to make sure there is a local and Aboriginal component to employment.” 

Mark Fitzgerald, senior vice-president of production with Progress Energy, also spoke about the marketplace at the forum. 

He said Progress hit peak drilling activity in 2014, and that it would be more sustainable if it had fewer rigs. But even with fewer rigs, Fitzgerald expected more stable, steady work. 

“It used to be a very seasonable business, and I’m glad to see those days are gone,” he said. 

“We used to operate (mostly in) winter… that peak is almost gone now, and it’s a  year-long, steady state, which is good news for the (oil and gas) service sector.”

Fitzgerald said his parent company Petronas is still going through the regulatory process to build Pacific NorthWest LNG, a project that would liquefy and ship natural gas overseas. For him, the lack of an overseas trading partner is not good for either the company or for the local community. The United States is Canada's only natural gas customer, though Petronas has arrangements with four partners to take the liquefied natural gas from Pacific NorthWest if the terminal is approved and built.Regardless, he emphasized that Progress would be in the region long-term.

“Our presence in northeastern B.C. will be measured in decades, it will not be measured in months or years,” he said. 

“We anticipate 20 to 40 years of flat, stable activity throughout this area.”


[Editor's note: This article has been updated to clarify that Progress Energy reached peak drilling activity, not production, in 2014, and that the United States is currently Canada's only natural gas customer. Petronas has four arrangements in place with partners to take natural gas from its Pacific NorthWest LNG project, if approved and built.]

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