Exxon’s LNG export plan to have minor impact on gas prices: filing

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Exxon Mobil Corp.'s proposal for liquefied natural gas exports from Canada's West Coast would have only a modest impact on natural gas prices in this country as eastern consumers increasingly turn to imports from the United States to meet their needs, a former National Energy Board chairman said in a filing to the regulator.

In a submission filed with Exxon's application Thursday, Roland Priddle said the proposed exports are "not likely to cause Canadians difficulty in meeting their energy and natural gas requirements at fair market prices."

Mr. Priddle – who was NEB chairman from 1986 to 1997 – cited an estimate made by Calgary consulting firm Ziff Energy that the LNG exports would add only 29 cents per million cubic feet of gas to the price of gas, which is primarily priced in the continent-wide marketplace. The NEB allows natural gas exports as long as Canadians can meet their own supply at reasonable prices, and Mr. Priddle said gas prices need to rise significantly just to allow companies to earn a profit from production.

On the New York Mercantile Exchange Friday, gas closed at $3.79 (U.S.) per thousand cubic feet at Henry Hub, a key North American benchmark, but both U.S. and Canadian regulators say prices need to climb moderately in the next two decades to support production growth.

Exxon and its Canadian subsidiary, Imperial Oil Ltd., have filed for approval to export some four billion cubic feet (bcf) per day of LNG – equivalent to a quarter of the country's current production – over 25 years. In doing so, the U.S. giant has leaped into a race to build LNG projects on the British Columbia coast to feed an Asian market that is hungry for natural gas and pays a premium price for imports.

While the companies are a long way from making an investment commitment, their plan would build from two-bcf per day beginning in 2021 to four-bcf by about 2025, and would draw on supplies from the Montney and Horn River shale gas fields in northeastern British Columbia and the Duvernay in Alberta.

Competitors like Royal Dutch Shell PLC, Chevron Corp., Apache Corp. and Britain's BG Group PLC are touting their own plans for LNG facilities in Kitimat, B.C., and Prince Rupert, B.C.

So far, the rush to export Canadian gas has not sparked the kind of controversy seen in the United States, where industrial users are urging the Obama administration to go slow with export plans to prevent a run-up in prices and preserve the North American energy advantage that has been credited for new investment in chemical plants and other energy-intensive industry.

Industrial users in Eastern Canada are more concerned about ensuring adequate pipeline capacity to bring imports from the booming shale gas regions in Pennsylvania and Ohio, said Shahrzad Rahbar, president of the Industrial Gas Users Association of Canada.

In his submission, Mr. Priddle noted the gas imports from the U.S. into Central and Eastern Canada reached three billion cubic feet per day, equivalent to a quarter of Canadian production.

"Pipeline imports will contribute to meeting a large and growing proportion of eastern Canadian gas requirements," he said.