Resource World Magazine

24 www.resourceworld.com j u n e / j u l y 2 0 1 4 i n s i g h t s & i n v e s t m e n t s E r i c H o e s g e n & D e n n i s H o e s g e n T he exploitation of foreign markets has formed the backbone of business and economics since inception. If it hadn't been for the high European prices of silk and spice, there would have never been such a massive investment made in trying to discover the most efficient way to access them. We all know how that story ended and how the land and labour disparities that followed completely transformed the New World. Price imbalances continue to reshape our world as we now witness the develop- ment sweeping over the East at a record pace. The more things change the more they stay the same, as the flow across the Atlantic Ocean has shifted to the Pacific. The lesson is that opportunities for major arbitrage will rarely go unsatisfied. This is why the major reduction in price for natural gas from one side of the Pacific to the other coupled with the increasingly cost effective means to liquefy and ship LNG have set the stage for the production of major exportation markets here and abroad. These things are clear along with the fact that the window is currently open for certain regions to develop long-term sup- ply arrangements. In British Columbia, the provincial government has been a leader in targeting the natural gas sec- tor and approving export licenses with seven major companies having received licenses to date and several others pend- ing. Until recently, it had appeared that some of the momentum may have been lost with other countries like Australia, Russia, Mozambique and even the US hav- ing made up ground in the race to assume market share. Canada is obviously a very attractive environment for infrastructure investment with its stability across all frontiers; how- ever, this has been offset until recently from the uncertainty that has been pre- sented by a lack of clarity surrounding the fiscal regime and prevailing tax structure. We say until recently because it was announced at the time of this writing that the BC Premier's recent LNG related tour of Asia has resulted in some private agreements being made with major stakeholders concerning the tax struc- tures that will be announced in November. This should pave the way for the com- ing financial investment decision (FID) from Pacific NorthWest, anchored by PETRONAS, to be made by the end of 2014, as they have intended. This is sig- nificant as the window of opportunity will not stay open forever and once the invest- ments on these mega-billion dollar capital infrastructure investments are made, the companies will be collecting ROI's for decades to come. It is forecast for the consumption of natural gas in China to more than triple from 2.3 bcf/d in 2013 to 7.6 bcf/d in 2020. In order for domestic export capacity to be in place by 2020, FIDs will need to be made by 2015. A FID by LNG Canada, with the newly increased 50% stake held by Royal Dutch Shell, is expected within the next 18-24 months. Overall, there are nine proposed LNG export terminals that are scheduled to start up by 2020, if they proceed as planned. The most advanced projects are anchored by Chevron, Shell, PETRONAS, EXXON, or ESSO and have upstream gas supply and even offtake agreements already in place. If all of the projects that are planned to be online by 2020 go ahead, BC will become a global presence in the export market for LNG providing over 8.8 bcf/d. The Premier seems confident, recently stating, "Securing a commitment from PETRONAS shows that our strategy for attracting investment to BC is work- ing." Adding, "Our goal is to be the most competitive jurisdiction in the world for LNG." There is no doubt that LNG has the potential to change the landscape of BC quite dramatically. The economic value would be huge for the more rural north- ern region. The tax and royalties would also provide long-term fiscal support for the citizens of the province for many years to come. The big question is: How can investors capitalize on this massive oppor- tunity? The answer is simple. Natural gas wells are the most fracturing intensive in the Western Canadian Sedimentary Basin (WCSB). Over the life of the project, it would take approximately 900 Montney wells to provide the feed gas to support a Liquid Natural Gas – The rising tide that lifts all There is no doubt that LNG has the potential to change the landscape of BC quite dramatically. The economic value would be huge for the more rural northern region. The tax and royalties would also provide long-term fiscal support for the citizens of the province for many years to come.

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