Prospect of global gas market gets a big push from Canada

New gas developments in Canada pose a threat to Qatar

Two Canadian gas export projects have gained momentum, raising prospects for the long-awaited global gas market to emerge through new trade links across the Pacific.

That could raise worries for Qatar, which, amid a global gas glut, has continued to negotiate long-term contracts with buyers in the premium Asia-Pacific market.

Last week, Encana, the biggest Canadian gas producer, agreed to join the US group developing the C$3.5 billion (Dh13.1bn) Kitimat liquefied natural gas (LNG) project, which aims to export 10 million tonnes a year of super-chilled gas to Asia from Canada's Pacific coast, starting in 2015.

Following the deal, the terms of which were not disclosed, the US oil and gas producers Apache and EOG Resources will respectively hold 40 per cent and 30 per cent stakes in the Kitimat project. Encana is to take 30 per cent.

The Canadian company's entry into the consortium is significant because it holds large tracts of gas shale properties in western Canada from which output could be raised from 2.8 billion cubic feet per day (cfd) to as much as 7 billion cfd - an amount equivalent to nearly half Canada's total current gas production.Encana also has the financial, industry and political clout to champion a new trans-mountain gas pipeline that would be needed to connect the remote gasfields to the Pacific coast.

Last week's deal puts Encana "at the forefront of a continental push to deliver exports of abundant natural gas for the first time [to Asia] from Canada", said Randy Eresman, Encana's chief executive.

The company has already forged relationships with prospective Asian buyers, agreeing to C$6.5bn of Canadian shale-gas ventures with PetroChina and Korea Gas.

The Kitimat consortium, however, may not be the first to export LNG from Canada. A group of private US-based gas companies has filed an application for a second project to ship gas from Canada's Pacific coast to Asian countries.

The consortium, led by Douglas Channel Energy Partnership, based in Houston, proposes to export an initial 900,000 tonnes per year of LNG, starting in 2013, with the capital cost of the first phase estimated at between C$360 million and C$450m.

The smaller project would not require construction of a major pipeline. Encana estimates that prices for gas sales to Asia currently average about US$12 (Dh44) per million British thermal units (btu), compared with recent North American market prices of about $4 per million btu.