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Rejean Tetrault, operations manager for Shell Canada. (BRENT JANG/THE GLOBE AND MAIL)
Rejean Tetrault, operations manager for Shell Canada. (BRENT JANG/THE GLOBE AND MAIL)

B.C.’s multibillion-dollar path to an energy powerhouse Add to ...

Rejean Tetrault is happy to be warming up in “the doghouse.”

It’s minus 25 C, but the operations manager for Shell Canada Ltd. is shielded inside a steel shed on a barren stretch of northeastern British Columbia. Other Shell employees and contractors, wearing ski masks under their hard hats, take their positions in the control room and on the drilling floor.

Mr. Tetrault keeps a close eye on electronic monitors in the shed, as a drilling rig cuts deep into the rock below to tap into the province’s new mother lode: natural gas.

Advances in energy technology in recent years have revealed that northern B.C. hosts an enormous amount of natural gas – an estimated 271 trillion cubic feet within the B.C. portion of the Montney play alone. It’s enough to keep production flowing for about 100 years.

For the debt-burdened province, the promise of a flourishing new industry is mouth-watering. The B.C. government sees a $1-trillion economic bonanza and jobs measured by the tens of thousands over the next three decades, as global energy players flock to invest in natural gas production and export facilities. The Canadian energy industry and the B.C. government hope this region will one day be mentioned in the same breath as Alberta’s oil sands for economic importance to Canada.

“My children’s children might be working in this industry. I know it freaks people out when I say that,” says Mr. Tetrault, who moved with his wife and three kids to Fort St. John from Calgary in 2011. “My children’s children’s children might still be working on this.”

With its ambitious Groundbirch project, Shell is among more than 30 companies operating hundreds of well sites in British Columbia’s Montney shale gas play.

These are still early days, but multinationals are being lured to B.C. by the prospect of piping the gas from the north to export terminals they want to build in the Prince Rupert and Kitimat areas on the West Coast. Plans call for the prized commodity, used for heating, electricity production and a host of industrial applications, to be super-cooled into liquefied natural gas, loaded onto ships and exported to LNG-thirsty customers in Asia.

For energy companies in B.C., a wide pricing gap in global natural gas markets presents a massive opportunity. U.S. spot prices averaged $3.70 (U.S.) per million British thermal units last year (although they have spiked recently due to the cold snap). By contrast, customers in Asia, where gas isn’t as plentiful, often pay four times that.

Natural gas producers here are desperate to capture those strong prices abroad, because the domestic industry has suffered a supply glut and low prices for years. Gas exports from Canada to the United States have fallen nearly 25 per cent since 2007. The U.S. shale gas boom has swamped the market and hurt demand for Canadian natural gas.

But B.C.’s gas windfall is far from a sure thing. Canada is behind in a global race to supply LNG, and rival producers are coming on strong. British Columbia’s fledgling LNG industry will face fierce competition from an array of projects in Australia, Qatar, offshore Africa, Russia, the U.S. Gulf Coast and Alaska.

“In particular Australia and to a lesser extent Nigeria could emerge as significant LNG suppliers, with Australia challenging Qatar as the world’s largest LNG exporter,” according to the Canadian Association of Petroleum Producers.

The risk for B.C. is that other competing LNG producers will get to market first, quench demand in Asia, and push prices back down to the point where multibillion-dollar projects on the West Coast fail to generate solid returns.

Boom Town

While the B.C. government has been highlighting a flurry of proposals for LNG export terminals in the northwestern part of the province, the northeast is where the tale of the energy promised land begins.

Signs of a mini-boom are everywhere across the Fort St. John area. It’s remarkable, given that natural gas prices are down 70 per cent from a record high in late 2005. Instead of doom and gloom, civic leaders are decidedly upbeat.

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