Energy Update.
Waqar Syed, MBA

Several events have positively improved the near-term, medium-term, and long-term oil and gas development profile of the province of British Columbia and the Western Canadian Sedimentary Basin (WCSB). At the macro level, the importance of the WCSB in the global energy supply chain has considerably increased, as the western world’s focus has shifted towards energy security in the wake of sanctions on Russian energy exports. Also, Permian basin production – the mainstay of global oil production growth over the past several years – is nearing its peak. Within Canada, the B.C. government’s Blueberry River First Nations Agreement (BRFN), the expected start-up of LNG Canada in two years, the granting of key approvals for the Cedar LNG project, and the expected start-up of several pipeline projects that increase the WCSB’s export capacity add a secular growth component to the basin’s production and activity. In this report, we highlight key upstream and midstream developments in B.C. and the impact on energy service demand.     

Highlights:

The BRFN Agreement
On January 18, 2023, B.C. and the BRFN reached an agreement that will guide natural resource development that reduces development risk for certain key projects. The challenge for the upstream industry will be maximizing production while minimizing the environmental footprint and maintaining strong relationships with indigenous partners. There remain 650,000 hectares of “High Value” area with a development moratorium, but we see these having minimal overlap with where commercial Montney development is planned.    

B.C. Government’s Energy Action Framework Has Stringent Environmental Goals
The Province of B.C. has very stringent environmental goals for oil and gas project development, including the requirement that all proposed LNG facilities in the environmental assessment (EA) process or planning to enter the process will need to have a credible plan to reach net zero by 2030. B.C. also has a regulatory emissions cap for the oil and gas industry that aims to reduce the industry’s emissions to 33%38% below 2007 levels by 2030.   

Key LNG Projects Advancing
Shell’s 14 mmtpa (2.1 bcf/d) LNG Canada project continues to advance, with start-up expected in 2025. Phase 2, if approved, could expand the capacity to 28 mmtpa. A smaller (3.0 mmtpa) Cedar LNG project received its Environmental Assessment Certificate (EAC) from the B.C. government and federal approval from the Minister of Environment and Climate Change in March 2023. A third 2.1 mmtpa Woodfibre LNG project is under development as well.    

Canada Now Provides Secular Growth Opportunities to the Service Sector
The BRFN agreement, the expected 2025 start-up of LNG Canada, and the planned expansion of WCSB’s export capacity add a secular growth angle to the Canadian activity outlook at a rate of 5-10 rigs/year and pumping demand growth of 2-4 crews/year, though underlying pumping efficiency improvements could mute the growth rate. Given B.C.’s environmental regulations, operators will likely demand equipment with low environmental footprints.