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Steam rises from the cooling tower of Progress Energy Inc.'s Shearon Harris nuclear plant in New Hill, North Carolina, U.S., on Sunday, Jan. 9, 2011.Jim R. Bounds/Bloomberg

Another Asian firm has moved to lock up a piece of British Columbia's massive natural gas fields in hopes of one day shipping Canadian energy across the Pacific.

Malaysia's state-owned Petronas has agreed to pay $1.07-billion to partner with Progress Energy Resources Corp. on a trio of promising gas fields in the northeastern corner of the province. Though the Montney play in those fields has been drilled only five times, it's estimated to contain some 15 trillion cubic feet of natural gas, enough to feed Canada's entire demand for more than four years.

But it's likely much of that gas won't end up in Canadian homes at all. Instead, the two companies are pledging to study the potential for building a natural gas export terminal on B.C.'s West Coast. That fact underlines the rationale for the Petronas interest: Canadian gas is increasingly coveted as a fuel for Asian energy needs.

Though the deal marks Petronas' first investment in Canada, it comes amid a wave of overseas interest in securing access to B.C. natural gas. Petronas now joins PetroChina, Korea Gas Corp., Mitsubishi Corp. and Sasol Ltd. in making a series of Canadian natural gas acquisitions in the past year that are together worth nearly $9-billion.

Its LNG ambitions also fit into a broad industry move to set in place the multibillion-dollar facilities that will allow it to load liquefied natural gas into tankers and export it to consumers in China, South Korea, Japan and elsewhere. In fact, Petronas, which would own 80 per cent of such a facility and Progress the remainder, is pursuing the fourth potential LNG export terminal on the coast, with plans to begin a feasibility study in early fall.

Petronas is already the world's second-largest LNG exporter, with major stakes in several Australian export terminals. Its interest in Canada marks a shift in how global energy powers are assessing supply and demand needs, said Progress chairman Dave Johnson.

"The natural gas gold rush in Australia is just about done," and it's "very possible" it is shifting to Canada, he said.

"They feel there is a very, very strong future demand for long-term unconventional gas that borders on the Pacific Ocean, and certainly our B.C. assets would fall into that category."

Progress chief executive officer Michael Culbert said the intent is to move forward quickly, especially given the competitive landscape that is developing for natural gas exports.

"It's all about the first-mover advantage. And although there are numerous announcements out there for LNG facilities, there's not many that have a shovel on the ground yet. So Petronas is well-positioned to move this forward rapidly," he said.

For Progress, the deal is a validation of years of effort. Formed in 2001, the company grew through a series of mergers and acquisitions that included picking up land from industry giants like BG Group PLC and Suncor Energy Inc.

The company's founders, who have decades of experience in B.C., were attracted to a province that, a decade ago, was considered less friendly to oil and gas development. They consolidated land in an area that has produced some 500 billion cubic feet of gas in the past 50 years - but which had not garnered major interest until recently. It was only four years ago that Progress realized parts of its land include gas from the Montney play, which has become one of the most lucrative of the new "shale gas" plays in North America.

Up to that point, the company had drilled shallower rock that contained less gas.

"We were only a couple hundred metres short of payday, even 10 years ago," Mr. Culbert said.

The company's own growth shows the prolific nature of the Montney gas resources. Last year, Progress produced 10 million cubic feet a day from the Montney. Today, it is 75 million a day, a quarter of the company's output.

The Petronas deal will see Progress receive $267.5-million up-front, with the remainder coming over the next five years to pay for exploration and drilling. Analysts said the purchase price is in line with other such deals. Progress said it does not yet know whether it will need Investment Canada approval for the deal.

Progress Energy Resources (PRQ-T)

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