The Natural Gas Gold Rush

liquefied natural gas terminal | BCBusiness
Despite talks of a “gas bubble,” B.C. has plans to build new liquefied natural gas terminals in order to ship LNG to Asia.

Just as B.C. is planning expensive liquefied natural gas terminals supplied by massive shale-gas finds in the north, it looks like the industry could be headed for a bust.

There may be a severe downside to B.C.’s highly hyped natural gas resource that could result in a catastrophic market bust.

As B.C. ramps up its efforts to create liquefied natural gas (LNG) terminals to ship gas to China, where prices are substantially higher than they are here, there is already much talk of a natural gas bubble in North America that, when it bursts, could be as much or more severe than the U.S. housing bubble that ushered in the 2008 recession.

As co-editor of the energy and finance website Automatic Earth Nicole Foss writes, there are several problems with the natural gas industry today.

The discovery of unconventional shale gas, which is reached through “fracking,” or hydraulic fracturing, has convinced investors, experts and governments that shale gas wells – including huge fields in Northern B.C. – are the potential source of trillions upon trillions of cubic feet of natural gas.

This has forced the price of natural gas down so far that it costs far more to access it than it sells for. Gas companies are losing money on every well they drill and are barely hanging on. Some aren’t.

Yet it appears, the potential of fracked gas wells is vastly overrated.

According to Texas-based petroleum geologist and energy sector consultant Arthur Berman, fracking wells deplete at a much faster rate than had previously been believed and is still touted by the industry. In fact, most of a gas well’s production is done in the first year, with following years showing continuous declines.

Berman insists that only the core 10 to 15 per cent of a shale formation’s gas is commercially viable.

So what of those trillions of cubic feet of gas up in Northern B.C.? Take those estimates with a grain of salt.

And, given the massive cost (and other resources like time) to build LNG terminals, might we want to proceed with a little more caution as we race to compete with other countries to ship liquefied natural gas to Asia?

The gas gold rush, it seems, is ending.