Future of Alberta oil could be decided in B.C
Charles Frank , CanWest News Service
Published: Sunday, November 18, 2007
The future of Western Canada's energy industry may well be defined by what happens far from Alberta's foothills in the quiet town of Kitimat on British Columbia's picturesque coast.
While westerners have been waiting for and debating the merits of the Mackenzie Valley Pipeline for 40 years, plans that could see the construction of a West Coast LNG terminal in the next decade could play a role in ultimately short-circuiting the controversial $16.2-billion pipeline that was originally envisioned as bringing natural gas from the northern expanses of the Beaufort Sea to the gas-hungry markets of the United States.
More recently, the talk has been that the Mackenzie pipeline would fuel the gas-starved oilsands plants now under construction in and around Fort McMurray, allowing more conventional natural gas supplies to be funnelled through the pipeline network to the United States.
Those discussions have been further tempered by talk of as many as four nuclear power plants being built in northern Alberta - a scenario that, should it come to pass, would make the MacKenzie Valley natural gas redundant as an energy source for the dozens of oilsands plants and upgraders now under construction or being planned for the province.
No matter what, with experts in agreement that the demand for natural gas from North American residential and business consumers alike is scheduled to far outstrip supplies over the next 30 years, there is little argument that a cavernous future market exists for whomever is first to market with natural gas.
After that, the jury will be out.
Given the economic, philosophical and environmental complexities that have swirled around the Mackenzie Valley since its inception, its a relatively safe bet that the pipeline is at best a decade away. Construction alone is expected to take three to five years. And there is a growing chorus of naysayers who say that in today's soaring cost environment, getting gas down the Mackenzie may be little more than a proverbial pipe dream.
Not so getting natural gas into Canada via LNG - although, ironically, that too seemed little more than a pipe dream only a few short years ago, fuelled largely by the belief that importing natural gas was absurd in light of North America's aggressive land and offshore drillers, and that getting permits and permission might prove unduly difficult, even though LNG has been transported around the world for decades.
Today, however, LNG terminals are being developed on both of Canada's coasts as dramatically changing market conditions across North America open the door to new opportunities and new concepts.
As yet little is being said about the overall implications of the terminals being considered in places such as Kitimat, where Calgary-based Kitimat LNG hopes to be operational before 2010, and Saint John, N.B., where Canaport LNG is constructing a terminal that is expected to begin operations in late 2008.
Obviously unasked questions abound. What, for example, if anything, will LNG imports do to already depressed North American natural gas prices? North American natural gas is currently priced independent of European or Asian markets. Will a market fuelled by new LNG imports be subject to price wars? Or, more importantly, will price surges develop as competitors bid for the increasingly valuable fuel?
When the first tanker docks in Canada, will the North American natural gas price equation change forever? And if LNG proves more cost effective than the Mackenzie gas, will that be the final straw for the mega-project that by itself had the potential to change the economic and social structure of northern Canada?
There's more.
With at least two pipelines on the drawing boards aimed at bringing oil from Alberta's oilsands to Kitimat and then on to hungry consumers in other parts of the world, it's clear that Canada is destined to become an ever increasing component of the global energy equation - and as a result increasingly subject to the pulls and pushes of volatile offshore forces.
The irony, of course, is that the impending prosperity a connection to the Far East might bring to Kitimat could well bring economic uncertainty to other parts of Canada's West.
Calgary Herald
cfrank@theherald.canwest.com
© CanWest News Service 2007
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