A Look at Shale Gas

Shale gas extraction in B.C.’s Horn River Basin north of Fort Nelson has “the potential to be Canada’s first large-scale commercial shale gas operation.”

At least that’s what The Canadian Association of Petroleum Producers says while the National Energy Board has summarized the estimates by adding: “Having regard for the inherent uncertainty in estimating geological prospects and predicting gas potential, the agencies estimate the ultimate GIP in the Horn River Basin to be 10 466 109m3 (372 Tcf) to 14 894 109m3 (529 Tcf), with the expected outcome of 12 629 109m3 (448 Tcf).”

And industry estimations and language have been more optimistic.

The Kitimat LNG export facility website, for example, mentions that the Horn River Basin has been referred to as the “crown jewel of Canada’s unconventional natural gas industry,” and some analysts are “predicting over 650 Trillion Cubic Feet of unconventional gas resource potential in British Columbia.”

It should be noted that estimations of recoverable resources such as these are dependent on advances associated with horizontal drilling techniques and hydraulic fracturing procedures, and the figures are therefore subject to significant readjustments.  Furthermore, the interests of the estimator, and relatedly the working definition of ‘economic viability,’ and the timeframe of the estimate will all influence institutional projections.

However, what is important to take away is that despite the current low cost of natural gas, these massive gas resources, established and emerging, are driving market activity and development in B.C.. British Columbia will, therefore, set the standards and frame the ongoing discussion regarding the emerging Canadian unconventional natural gas industry.

The processing facility of the Kitimat LNG project site is located at Bish Cove, near Kitimat, and will be the first LNG export facility in British Columbia.

Apache Canada Ltd (Apache) commenced the project, and they have remained the most active shale gas operator in the Horn River Basin since 2003.  The Pacific Trail Pipeline (PTP) was originally proposed as the Kitimat – Summit Lake Natural Gas Looping Project, and was approved by the Canadian Environmental Assessment Agency in 2009, which concluded the “project is not likely to cause significant adverse environmental effects.” 

Unlike the Northern Gateway pipeline, the Pacific Trail Pipeline has avoided comparable controversy.

On the administrative front, Apache has received the appropriate federal and provincial environmental certifications, consulted with and signed a benefit agreement with the First Nations Limited Partnership, and received approval for a crucial 20-year NEB export licence.

Since December 2012, Apache has secured the financial and technical capacity of Chevron Canada Limited. Chevron Canada will operate the LNG plant and the Pacific Trail Pipeline, while Apache Canada will continue to operate the upstream assets in the Horn River Basin.

More specifically, $405 million in proceeds were received from Chevron Canada Ltd. in the joint venture agreement. The project is in the preliminary front-end engineering design (FEED) stage.