We've Got Gas. Right, Who Doesn't?

British Columbia's former Liberal premier and grifter-in-chief, Christy Clark, vowed that the province's abundant reserves of natural gas would be our ticket out of debt and deficits.

Even Clark's successor, NDP premier Jim Horgan, has it bad for natural gas. He can't get enough of the stuff.

The problem with natural gas is that there's a glut of it and plenty of jurisdictions have it in abundance. That glut has kicked the floor out of LNG prices. 

A decade ago, natural gas was heralded as the fuel of the future. In shale fields across the country, hydraulic fracturing uncorked a lucrative new source of supply. Energy giants like Exxon Mobil and Chevron snapped up smaller companies to get in on the action, and investors poured billions of dollars into export terminals to ship gas to China and Europe.

Then things changed.

Chevron, [America's] second-largest oil and gas giant after Exxon, said on Tuesday that it would write down $10 billion to $11 billion in assets, mostly shale gas holdings in Appalachia and a planned liquefied natural gas export facility in Canada. The move was an energy company’s clearest acknowledgment yet that the industry has been far too optimistic about the prospects for natural gas.

...Some analysts said the gas slump could persist for some time because the cost of wind and solar energyhas tumbled in recent years, making those renewable sources of energy more attractive to power producers. And while gas exports are climbing, growing production of the fuel in Qatar, Russia and Australia threatens to drive down international prices over the next few years.

...Gas producers have struggled in part because New York and other Northeastern states have made it harder to build pipelines to transport the fuel. But analysts point to a far bigger problem: The industry is just producing too much gas. In some oil fields where gas bubbles to the surface with crude, it has become cheaper for producers to burn the gas than gather it and send it to market. 

“Natural gas is in the tank,” said Patrick Montalban, president of Montalban Oil & Gas Operations. “We’re looking at a project right now of over 200 wells in Montana that are for sale, but they are uneconomic. Not only are the wells uneconomic, the gathering of the gas is uneconomic.”

...In a recent report, Morgan Stanley estimated that demand for natural gas would grow for a few years but fall 13 percent between 2020 and 2030 as utilities increasingly switch to wind and solar power. Future regulations or a carbon tax put in place by lawmakers worried about climate change could accelerate the transition to renewables. 

Exports offer perhaps the greatest growth potential for American natural gas. But even as companies build more liquefied natural gas export terminals across the Gulf Coast, competition from Russia and Qatar is intensifying and analysts fear there could soon be a global glut of gas.

The Canadian venture that Chevron's looking to ditch? That's the proposed LNG plant in Kitimat. The American giant took a 50 per cent stake in that project and now just wants to unload it.

In late June, finance minister Bill "Job Churn" Morneau announced that Ottawa was chipping in $275 million fossil bucks for what he boasted was the "largest private sector investment in Canadian history."