According to a Ministry of Energy report published last month, industry investment in the province's gas sector is expected to top out at $6.3 billion in 2010-11, and then decline 20 per cent to $5 billion in 2011-12.
In fact, the ministry does not expect investment levels to recover until 2013-14 when annual investment in exploration and development is targeted to hit $6.4 billion.
The prediction comes amid a plethora of massive shale gas finds throughout North America, which have reduced prices in recent months.
At press time, natural gas was trading at US$3.89 per million BTUs, down from $4.73 a month earlier.
On February 17, the B.C. government put another $120 million on the table to "spark" investment in the sector via its royalty credit program.
Kevan Holroyd, executive director of Ernst & Young's oil and gas practice, believes junior natural gas companies will look to be acquired or land significant investments this year to support their exploration programs.
"What we're going to see is an increase of natural gas companies that have to transact in one shape or form to be able to keep their drilling programs going," Holroyd said. "One way is for folks to come in and take them out by way of a transaction."
Although prices remain low, Holroyd said the investment community views the Canadian gas sector as a long-term holding.
In March, gas giant Encana inked a $5.5 billion agreement with PetroChina for 50 per cent of the Calgary company's Cutbank Ridge assets in B.C. and Alberta.
That deal followed a $50 million agreement in which Vancouver's Pacific Northern Gas agreed to sell its 50 per cent stake in the Pacific Trail Pipeline to Apache Canada and EOG Resources Canada.
Holroyd said a quarter of investment in Canada's oil and gas sector last year originated in China, Korea and Thailand.
- Joel McKay/BIV
from Western Investor, April 2011
