Western Canada's Oil & Gas Industry Cheers Federal $1.6 Billion Lifeline as Prices Falter

Researched by Industrial Info Resources (Sugar Land, Texas)--Western Canada is home to large reserves of natural gas and natural gas liquids, key feedstocks to drive growth in the energy and petrochemical markets. But record-low prices have battered the region in recent months, spurring the Canadian government to offer a $1.6 billion support package for oil and gas companies, according to The Canadian Press. Industrial Info is tracking more than $15.6 billion in active projects that are set to begin construction in first-quarter 2019, more than $12 billion of which is attributed to the Oil & Gas Industry.

Click on the image at right for a graph detailing the top 10 industrial sectors in Western Canada for first-quarter 2019 project kickoffs.

"When Alberta hurts, so does Canada," said Natural Resources Minister Amarjeet Sohi following Tuesday's announcement. He added: "The lack of ability to build pipelines in Canada is something we need to fix."

Indeed, constrained pipeline capacity is among the factors that sent the price of Alberta crude down to $11 per barrel last month, according to CBC News, although production cuts and promises of increased rail support from Alberta's government sent the price to $26 per barrel last week. Still, the U.S. is currently the only major export market for Canadian oil and gas products, and the lower cost-per-barrel for U.S. West Texas Intermediate (WTI) is causing Canada's economy to lose as much as $80 million per day, according to CBC News.

Many potential oil sands producers have hesitated to invest in the Western Canadian region because of the low prices. One exception is Imperial Oil Limited (TSX:IMO) (Calgary), which last month approved construction of its $2 billion Aspen Bitumen Processing Plant near Fort McMurray, Alberta, which is designed to process 75,000 barrels per day (BBL/d) using solvent-assisted, steam-assisted gravity drainage (SAGD) extraction technology. The project includes drilling five well pads, each with between seven and 21 well pairs. For more information, see Industrial Info's project report.

Alberta's crude-production cuts were praised by MEG Energy Corporation (TSX:MEG) (Calgary, Alberta) earlier this month, when Chief Executive Officer Derek Evans said his company had considered laying off workers and slashing production at its Christina Lake facility by 30%. Evans said the mandated cuts lifted Canadian heavy crude prices enough to justify keeping the employees on: "As of last Friday, we were trying to figure out how we could minimize, absolutely minimize, our capital expenditure," Evans said in an interview with BNN Bloomberg Television. He said the cuts have "taken away the belief that we're going to have to lay off people before Christmas," according to Bloomberg.

MEG plans to initiate a $120 million brownfield expansion at Christina Lake near Fort McMurray, which would drill new SAGD well pairs, increasing steam production and streamline operations to boost total capacity to roughly 113,000 BBL/d by the end of 2020. For more information, see Industrial Info's project report.

Alberta's natural gas will feed Kineticor Resource Corporation's (Calgary) $552 million Three Creeks Power Station in Peace River, Alberta. The facility will include three simple-cycle combustion turbines that will produce 230 megawatts each, for a total output of 690 MW. For more information, see Industrial Info's project report.

Among the pipeline projects likely to begin construction in first-quarter 2019 is TransCanada Corporation's (NYSE:TRP) (Calgary) $900 million Coastal GasLink pipeline in British Columbia, which is designed to run 422 miles from an area near Dawson Creek to the proposed LNG Canada facility near Kitimat. It will deliver up to 1.7 billion cubic feet per day of natural gas (eventually expandable to 3.6 billion cubic feet) from Groundbirch, which is west of Dawson Creek in the Montney Formation, to multiple planned liquefied natural gas (LNG) production plants along the route. For more information, see Industrial Info's project report.

The Coastal GasLink project got a boost earlier this month, when a British Columbia Supreme Court Justice issued an injunction ordering opponents to remove a blockade set up in 2012, allowing workers to begin construction, according to the Prince George Citizen. The blockade was established in the name the Unist'ot'en, a First Nations group within the Wet'suwet'en Nation that has land near the planned route.

British Columbia also is home to two drilling programs from ARC Resources Limited (Calgary) that are set to kick off early next year: the $100 million Parkland/Tower development near Taylor, which involves drilling more than 15 new production wells for crude oil and natural gas, and the $80 million Dawson development near Rolla, involves drilling 20 new production wells for natural gas. The Dawson development also is expected to see a $175 million expansion of a mechanical-refrigeration processing plant for natural gas, which will add a train with a 90 million-standard-cubic-foot-per-day inlet capacity of natural gas from Montney, to produce 7,500 BBL/d of NGL. For more information, see Industrial Info's project report on the Parkland/Tower development, Dawson development and Dawson processing expansion.

Hal Kvisle, the chairman of ARC Resources, applauded Alberta Premier Rachel Notley's decision earlier this month to curtail oil production: "I think it was really the only option at this point. The government of Alberta had to do something in response to a difficult situation that's really been created by [the federal] government. It's been the regulatory delays over pipeline construction that many of us foresaw more than 10 years ago."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.