$250 billion to be spent in oil and gas sector in B.C. over the next 20 years
Speaking at the telephone conference February 5th, on the company’s Q4 2012 results Gregory L. Ebel, CEO of Spectra Energy reported: “Our Western Canadian business has $7 billion of expansion growth on its horizon. Spectra Energy is in the midst of four world-class gas resources: the Horn River, the Montney, the Cordova, and the Liard, in Western Canada, (and) is attracting significant international investment, with total investment in British Columbia natural gas sector alone projected to reach $250 billion over the next 20 years. Much of that investment likely will be directed toward the development of the liquefied natural gas terminals and the pipelines that serve them. And we are excited to be a participant in this market.”
At the teleconference he was asked about the Empress pipeline. Ebel said the impact from the conventional (gas) side of things in Western Canada 2013 is about $50-$55 million. “Obviously you have got growth in the unconventional side, which is helping to offset some of that, but we’ll have to see how things develop in 2014. There is always some risk that could continue.”
Ebel said there wasn’t a fall off in the fields as happened in some US areas, “It’s pure commodity response…You see some of that drilling come back. And in fact a lot that might be on the interruptible side. On the pipeline side, that’s not terribly concerning to me…with respect to Empress, everything’s on the table, in terms of looking at Empress, you’re right there’s too much capacity there…that’s something we’re looking at. Empress is not a particularly strategic item for Spectra Energy.
“So I feel pretty good about our ability to claw a way back on Empress this year. But everything’s on the table from a rationalisation perspective.
“Up in that neck of the woods (northeast BC) it’s a lot drier, so as you know everybody is going after liquid rich gas. So as we move down into places like Montney in places like that, with more liquid rich gas, those areas end up coming back. But in the northern areas, Horn River, which is dryer, you’re seeing people decide not to renew their contracts,” Ebel said.
Asked about the length of contracts Ebel said they were different lengths, usually two to three years. “They can all be different. We’ve got – we got everything from – just like on the pipelines, got annual contracts that come up for renewal so they could be anywhere from one year contracts to five, ten year type contracts to come up for renewal, now that we see a pickup in last year and again this year, I would expect we’ll see that as gas prices come back, the interruptible obviously is at a higher rate, but it’s just a little bit more uncertain. This is pretty typical of Western Canada over a five or six year period. You see the build up, you see fall off, you see the build up, and it’s got nothing to do with the gas not being there. It’s a little bit different from what we see in the US, where you see complete decline in fields.
On the price of propane, Ebel said, “Let me start with Empress. So I think as we look at this and look at the contract structure, and what we’re seeing today in extracts and premiums, as you will I understand it’s dynamic. But I would say if you get propane into that $0.90 range we are making money all other things being equal, so the extraction premiums are important Here. But the $0.90 range; I think this is where Empress does pretty well. You still have a situation where you’ve got too much capacity, for not enough volume. So if you could figure out a way to rationalise the capacity, the issues with respect to extraction premium help to look after themselves. You’re going to see national gas liquid prices move back up. And as I said, if you get propane in the $0.90 range, it’s pretty good. So you have been getting that earnings growth there…I mean maybe you can have a similar type hit for a year or so, but I think you’re going to see that turnaround so that you will see expected growth across the entity. Across the Western Canadian entity.
“I think the other fact out there which would be very positive on the processing side, will be these LNG facilities starting to get in Place. You’re going to need more processing capacity to take that on. And that’s where I see some real opportunities over the long term.”
Ebel said Spectra has had discussions with BG Group, and they’re going full tilt. They’re very keen on the project.
“They’re the only one to have filed its environmental assessment documentation with the provincial government there, so that’s moving forward I think you’ll expect to see, in the 2015 to 2016 timeframe.”
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