Interest Grows in LNG Use for Western Canada E&P Operations

Interest Grows in LNG Use for Western Canada E&P Operations

Advances in hydraulic fracturing that unlocked potential shale gas resources in the United States are being successfully applied to Canadian shale gas resources. With seven shale plays in Alberta estimated to hold resources of 3,424 trillion cubic feet of natural gas – along with shale resources such as the Horn River Basin in British Columbia, Canada's shale gas potential has vaulted the country into a position as a potential LNG exporter. This shale gas play has also created opportunities for exploration and production (E&P) operators in Western Canada to switch from diesel to natural gas in their operations, a trend that is also occurring in the United States with operators such as Apache Corp., which has switched to using natural gas in its hydraulic fracturing operations.

Rigzone spoke with Ken MacQuarrie, corporate development manager of Canada-based fuel and petroleum product supplier and reseller Parkland Commercial Fuels, and Petersen Barnaby, LNG Business Development Executive of Shell Canada, about what trends they see for the use of liquefied natural gas (LNG) in exploration and production operations in Western Canada.

E&P company officials gathered last month in Calgary at the inaugural LNG for E&P Operations Forum, which highlighted the latest in natural gas powered equipment and vehicles and highlighted the opportunities for greater use of LNG in E&P operations. 

Are oil and gas operators beginning to show more interest in using natural gas in E&P operations in Western Canada? Is this primarily due to cost or other factors such as environmental concerns? What kind of market share does Parkland see for natural gas in upstream and downstream oil and gas operations in Western Canada?

Ken MacQuarrie: Yes, there is an increasing level of interest being expressed by E&P companies in Western Canada for LNG driven by the favorable economic and environmental benefits of LNG as evidenced by the strong number of companies represented at the first LNG for E&P conference May 14. In total, we had over 285 pre-register and 75 E&P companies represented. The primary benefit is economics with LNG demonstrating savings up to 30 percent versus diesel in oil and gas operations. The environmental benefits in reduced particular matter, reduced sulfur oxide (SOX) and nitrogen oxide (NOX) also contribute to customer's interests. While it is still too early to determine the degree of market penetration LNG might enjoy in Western Canada we believe that it could be significant. US oil and gas experience for both fracs and drilling rigs converting to natural gas are experiencing up to 55 to 60 percent substitution. 

Has there been a push not only in Western Canada but throughout the country to use more natural gas domestically to boost economic and job growth, similar to the trend seen in the United States? What are some obstacles/challenges to achieving this goal?

MacQuarrie: Currently, the Canadian market is predominately based on conventional diesel. There has been limited supply due to only 4 peak shaver plants in operation across Canada (utility companies storing LNG for peak demand) with little available for sale. With the announcement of Shell's new Jumping Pound liquefaction facility and other announced plants, the supply will become available. The rate of customer adoption (demand) will also be a factor in the growth of LNG. With strong economic and environmental benefits, we believe demand will develop. Finally the lack of infrastructure and distribution capacity will need to grow to link the supply to demand. All three legs of the stool, (supply, demand and distribution support) are necessary for the market to grow domestically. 


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Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com

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