The B.C. government announced plans to inject $115.6 million into the province's northeast gas sector last week just days after a Calgary-based investment dealer slashed its stance on the commodity.
The money will come from the province's Infrastructure Royalty Credit program and help 16 companies build 21 new roads and pipelines in B.C.'s red-hot shale gas sector.
Energy, Mines and Petroleum Resources Minister Bill Bennett said the royalty program supports a sector that saw $6 billion in investment activity last year.
"The opportunity for us is to keep the industry growing, keep them looking for gas and producing gas and paying royalties because, frankly, with the condition of the forest industry, the world economy … this is one of the few bright spots," Bennett said. "It's going to get really tough if something happens to the oil and gas industry."
But some investors don't share the minister's optimistic view. On August 30, Calgary's First Energy Capital Corp. took a bearish stance on natural gas.
The investment dealer cut its average price on the benchmark Nymex market to US$4.63 per million British thermal units (mmbtu) for the remainder of 2010. That's $0.37 lower than was originally forecast, and First Energy also decreased its price target for 2011 by US$1 to US$4.75.
"We are promoting avoidance of the North American natural gas investment space, seeing robust supply and high storage levels until well into 2012," First Energy said in a report.
That news came after gas prices dropped nearly 25 per cent in August to $3.70 per mmbtu on August 27.
"We've been quite bearish on natural gas for the past two years, and are still quite negative on it due to the oversupply of natural gas … principally driven by what's going on in the United States," said Randy Ollenberger, an analyst with BMO Capital Markets.
Long-term supply glut or not, Bennett said the province will continue to work with industry to build B.C.'s gas sector.
"I agree that certainly the price of gas is going to be depressed with all of the potential finds coming on like Pennsylvania and even New York … but I think our job as a provincial government is to make sure we're seen as a competitive place to do business and invest."
- Joel McKay, BIV
from Western Investor, October 2010
