On the eve of Premier Christy Clark's announcement of a strategy to promote the export of liquefied natural gas to Asian markets, a story out of Hong Kong provided a reminder of how fast things are moving in the volatile energy sector.
"PetroChina buys Canadian shale stake," was the headline from the Reuters news agency last Thursday, atop the news that one of the big Chinese state-owned oil companies had bought a piece of the action here in B.C.
The Calgary Herald provided the context: "The large Chinese LNG importer has agreed to put money behind Royal Dutch Shell's shale gas development in northeastern B.C., which lowers development costs and nudges the early stage export concept for Kitimat closer to reality."
The point being that Petro-China had already invested in a Shell-backed proposal for an LNG terminal in Kitimat, the largest of three touted by Clark in the announcement she made Friday.
Now the Chinese were also paying an estimated $1 billion for a 20-per-cent stake in Shell's shale gas property in the north-east, source of the feed stock for the proposed LNG terminal.
But in addition to securing a potential supply of LNG, China had other designs.
"PetroChina hopes to gain experience in management and production in the exploration and development of unconventional natural gas through its cooperation with Shell," a company representative confirmed to reporter Rebecca Penty of the Calgary Herald.
Or as the Bloomberg news service headlined it: "PetroChina, Shell deepen ties for 'powerful' shale potential."
Meaning not just their ties on this side of the Pacific, but in China as well.
For Shell is already involved in
helping the Chinese national petroleum company develop that country's shale gas reserves, which are enormous. The partners invested $400 million in a joint venture that saw a dozen wells drilled last year with a projected two dozen more this year.
Reuters again: "China is set for a shale gas revolution which will surpass that seen in the U.S., [says] the chair of Sinopec, the country's second-largest oil company." That from a report out of the World Petroleum Congress in Qatar last December.
The Sinopec chair reckoned that it might take the rest of the decade. But given that the Chinese shale gas reserves were estimated (by the U.S. Energy Information Administration) to be "by far the largest in the world" it was only "a matter of timing."
Nor is China likely to put up as many environmental obstacles to the development of shale gas, a controversial process that involves injecting water and chemicals into shale formations deep within the earth.
"In New York and New Jersey, authorities have halted drilling in response to public unease, at least temporarily," the New York Times noted recently. "Such sentiments are unlikely to stand in the way of China, where 1.2 million people were moved to make way for the Three Gorges Dam."
Times reporter Joel Kirkland visited one of the early Chinese shale gas drilling sites last fall and reported back on how the infant industry is getting a huge push from a driven government.
"Shale gas is among the largest onshore energy projects in China and it is treated as such by Beijing," he wrote.
"Tapping the homegrown shale could buffer the economy from supply shocks ... and shale gas can be a formidable competitor for high-priced liquid natural gas shipments sloshing around the open seas."
Including, presumably, all those hypothetical shipments from still-on-the-drawing board LNG terminals in B.C.
The first of the three is projected to be running by mid-decade, the second at about the same time with the Shell property to follow by 2020 at the
earliest.
In which regard, consider the conclusion drawn by FACTS, a consulting firm specializing in Asian petroleum markets, in a report on shale gas and other so-called "unconventional" sources of LNG, presented to the Pacific Energy Summit in Indonesia this time last year.
"Though still in the early stages, China as well as Asia as a whole, could reap significant rewards from unconventional gas developments going forward," it noted, offering as a point of comparison, the five-fold increase in production over five years in the U.S.
"If Asia can replicate what happened in the U.S, there will be major implications for the global LNG market. After all, Asia currently accounts for over 60 per cent of LNG imports."
Not straightaway, however. "The direct impact on LNG will be limited through 2020." Which, ahem, is about when the third of those B.C. terminals is hoped to be up and running.
All of which recalls something Shell Canada president Lorraine Mitchelmore said last fall, by way of caution for everyone promoting LNG development in this country. "I'm not sure they understand the sense of urgency in front of us," she said.
"We have a very short window."
Her words ought to be posted on the wall for everyone in charge of
implementing B.C.'s LNG strategy.
