Scientist leery of B.C.’s LNG potential

David Hughes questions whether there's enough gas to feed planned exports

David Hughes is touring northwest B.C. drawing attention to his doubts re: the promise of an LNG industry.

“They’re going to put a bullseye on my picture down in Victoria,” says David Hughes as he leaves the interview room to continue on an eight-stop tour of northern B.C. to cast doubts on the promise of a liquefied natural gas (LNG) economic boom for the region.

An independent geo consultant with 35 years experience at the Geological Survey of Canada, Hughes has been a consistent voice of caution during the province’s gallop towards an industry being promoted by the provincial government.

His 2013 report Drill Baby Drill warned the U.S. about its overestimation of new oil and gas reserves made accessible from modern drilling techniques and now a study of Canadian reserves with similar conclusions, BC LNG Reality Check, is to be published by the Canada Centre For Policy Alternatives in May.

Hughes thinks the amount of natural gas available in major reserves in northeastern B.C. and the ability of companies to extract it is greatly overestimated by the Christy Clark government and the companies pitching their multibillion dollar projects.

The information Hughes uses to argue his case comes from the federal National Energy Board (NEB) and the province’s B.C. Oil and Gas Commission’s own calculations and projections.

The first target for Hughes are the 18 liquefaction facilities proposed on the coast, 12 of which already have export licences.

He doubts they are even possible given the huge amount of production that would lead to and the reality of demand.

“Adding them up comes to 60 million tonnes more than the entire world trade of LNG,” says Hughes.

Just supplying one or two facilities would require a dramatic drilling increase beyond the midrange expectations of the National Energy Board, he continued.

Hughes says it’s likely Canada would become a net importer of natural gas to feed those facilities.

“Basically we have to ramp up gas production way more than the NEB reference case forecast in order to have more than one terminal,” he said of the 330 per cent increase from current gas levels anticipated by 2035 in midrange NEB supply projections.

“If we commit to 20 year projects, and are required contractually to provide that gas, we’re going to need to import a lot more gas.”

The “high case” scenario of five LNG plants, would require 43,000 new wells by 2040 according to his calculations and he says there are limits to how many drills will fit in these areas that can effect recoverability of deposits.

Just keeping up with current demand would require that 8,000 new wells be drilled in B.C.

And domestically in Canada, where we are huge consumers of energy because of the climate and distance between cities, that demand is massive and will continue to be large even as renewable energy sectors grow.

“We’re right up there with Saudi Arabia. Actually we are worse than Saudi Arabia. We use about 5.3 times as much energy per capita as the average person in the world. The Americans use 4 times the world average. We use 5.3.”

“What is the best use of those resources? Liquidate it as fast as we can?” Hughes asks.

“Future generations are going to curse us if we liquidate this for marginal returns.”

He said that in the five LNG terminal scenario the Canadian gas surplus would run dry in several decades.

“You could run a five terminal case, if you could drill wells fast enough, for about 40-50 years. You could run a two terminal case for longer but that’s making optimistic forecasts about recoverability.”

He said the amount of gas in the ground hasn’t been proven through drilling yet and is a theoretical “resource” number as opposed to reserve.

Hughes said he is aware of the optimism in the Terrace area and through the northwest for an economic upsurge.

“Prince Rupert is dying. Fishing is really down. Logging is really down. So people are really looking at LNG as wow, this could be really great.”

The final analysis of Hughes might even seem optimistic to those with vastly lowered expectations in an area that is pessimistic about grand promises.

He sees two projects led by state-owned companies as the most likely to forge ahead.

These are Grassy Point LNG led by China National Offshore Oil Corporation and Pacific Northwest LNG owned by Malaysia’s Petronas.

“Their concerns are maybe not as much profit-based as energy security based, so they are trying to tie down a supply,” said Hughes.

“They don’t care what the price is because they know they are going to need it eventually.”