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Supporters urged to temper expectations after Pacific NorthWest LNG approval

Project could lead to surge in drilling in Northeast B.C. in several years, but hurdles remain
Progress Energy, Petronas's upstream subsidiary for Pacific NorthWest LNG, would need to drill 200 wells a year to provide gas for the project, according to an analysis from CAPP.

Supporters of B.C.’s plan to liquefy and export natural gas plan to celebrate the federal government’s approval of Pacific NorthWest LNG with a party this Friday. 

But it’s too soon to break out the champagne. 

Those expecting an uptick in B.C.’s hard-hit natural gas fields following Tuesday’s decision are being encouraged to temper their expectations.

While the $11.4 billion project has cleared a major hurdle with federal approval, the Petronas-led consortium has yet to determine whether the project will be viable under the 190 conditions imposed by the Canadian Environmental Assessment Agency. 

Art Jarvis, executive director of Energy Services BC, said the approval of PNW LNG would be a morale boost for Northeast B.C., which has seen surging unemployment since the downturn in oil and gas prices.  

However, he cautioned against inflated expectations. 

“There are still 190 restrictions that have to be complied with, the world market is down, so the real deciding factor for Petronas is what they project is going to happen (with the price of natural gas) in 4-5 years,” he said. “B.C. and Canada are way behind the curve on having facilities to export LNG.” 

Progress Energy, the company which would drill the gas for Pacific NorthWest, welcomed the decision, but said it’s too soon to say how it will affect its drilling program. 

Moving forward, the project shareholders will conduct a total project review over the coming months, including Progress Energy’s upstream operations, prior to announcing next steps,” the company said in a statement. “At this time it is too early to determine the impact of this decision on Progress Energy’s near term development activities.”

Progress was the province’s busiest natural gas driller in 2014 with 203 wells—30 per cent of all drilling in the province that year. A spokesperson declined to say how many wells the company plans to drill in 2016.

Progress spent around $5 billion proving natural gas for PNW LNG over three years. This spring, the company made significant cuts to its capital budget as it awaited a decision on the project. 

If Pacific NorthWest LNG does move forward, there would be a spike in drilling activity, according to an analysis by the Canadian Association of Petroleum Producers (CAPP).  

B.C. saw 600 wells drilled in 2014—the year oil and gas prices collapsed due to an oversupply on the world market. This year, CAPP expects just 200 wells will be drilled in the province. 

PNW LNG would make up for some of the declines in production.  

At a presentation to businesses in Dawson Creek the day after the announcement, CAPP Manager of Exploration and Production Communications Chris Montgomery said PNW would export the equivalent of 15 per cent of Canadian natural gas production each day. 

Based on average well production in the Montney Shale formation, Progress would need to drill 200 wells a year to provide gas for the project. 

“It provides half that gap to where we were two years ago,” he said.   

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