Timing could be better for Deep Panuke gas9/26/2012
Natural gas from the Deep Panuke project will flow into a depressed market when production begins this fall, Scotiabank economist Patricia Mohr said Tuesday.
“Natural gas prices remain at historic lows,” Mohr said in an interview after the release of the Scotiabank commodity price index.
“There are indications the market is strengthening, but this will take several years.”
Officials with Encana Corp. of Calgary are sticking to the latest startup date of fall of this year for the Deep Panuke project, despite low gas prices.
Management has said the plan is to put the four wells at the offshore site into the mid-range of their potential production flow as soon as possible.
They are doing this to recover development costs and will adjust the flow as required afterwards.
Mohr said there was just a tiny bit of encouragement for conventional natural gas producers Monday when prices nudged upwards slightly to US$2.84 per million BTUs (British thermal units).
“Natural gas prices are a bit up off the bottom after sinking to US$1.90 per million BTUs in the spring, but prices remain at historic lows,” said Mohr.
She said prices still lag significantly below the US$4 per million BTUs minimum generally required by conventional natural gas producers to generate a profit.
This is a significantly different scenario than back in 2008 — before the recession — when natural gas prices on the New York Mercantile Exchange averaged US$8.90.
Encana has a couple of other major natural gas plays in British Columbia, the Montney and Horn River developments.
There are also about 20 new natural gas shale basins being developed across the United States.
Mohr said a couple of major liquefied natural gas plants — on the British Columbia and Texas Gulf coasts — will likely push up demand for natural gas when they become operational.
The existing price for liquefied natural gas in Japan is hovering around US$17 per million BTUs, she said.
The Scotiabank commodity price index climbed 3.1 per cent month over month in August.
A nascent recovery in the United States housing market — in the face of tight North American building material supplies — was an item of note in the report.
“Substantial sawmill closures in Canada and the United States since 2007 — combined with fewer logging contractors, tradespeople and truckers in the building materials industry — will create challenges in meeting higher demand,” Mohr said in her review.
“While lumber mills will be able to increase shifts in 2013, higher prices will be required.”
(The Chronicle Herald)