Understanding the Northeast BC Growth Story: It’s All About LNG

By Chris Biasutti

Northeast BC is poised for serious, explosive growth in the next few years, and I believe it is going to be driven largely by oil and gas, and specifically by Liquefied Natural Gas (LNG).

First, here’s a quick primer in oil, gas, and LNG: Oil and gas are extracted from hydrocarbon deposits in the ground. Although oil can be shipped in its natural liquefied state, natural gas is easier to ship if it is liquefied. Therefore, natural gas liquefaction plants turn natural gas into LNG, where it is shipped to its destination, and then the LNG goes through regasification to turn it back into a gas and get it out to consumers.

Here are seven reasons why LNG is going to transform this region, creating new jobs (and driving a massive shift in housing – which equals a massive opportunity for investors who are paying attention and getting in early).

#1. We’re only seeing the beginning of natural gas demand. There has been some growth in Northeast BC’s natural gas industry but it is largely driven by domestic demand. And even more surprising, it’s been about replacing the dwindling supply rather than meeting new demand. But this is changing because…

#2. Northeast BC is sitting on top of a MASSIVE hydrocarbon reserve. The Montney Basin in Northeast BC is the third largest hydrocarbon resource in North America.

#3. The US wants natural gas. Americans have pressured their politicians to ease dependence on foreign oil but primarily that means Middle East oil. Canada is not considered a foreign nation, especially since we share some critical resource basins (like Bakken). So the US needs “domestic” (North American) resources. In fact, 80% of all new power capacity built in the US is expected to run on natural gas. Yes, there are sources in the US but Canada is poised to supply some of that natural gas.

#4. China is thirsty. China’s natural gas consumption has been more than double its production for more than a decade. And this is projected to get even worse, as its consumption is expected to be more than triple its production in the next ten to 15 years. China is energy-thirsty! China has invested in new LNG plants even though they didn’t have a source for LNG. They knew they would need it so they built it, and then they started looking for LNG. There are three major sources of LNG supplying China: The Middle East, Australia, and Canada. Canada is the more attractive choice.

#5. China is investing in LNG in Canada. June 28, 2012. Petronas acquires Progress Energy for $5.5 billion to develop its “vast land holdings” in the Montney Natural gas formation in Northeastern BC. Nov. 8, 2013. Petronas continues to expand its holdings in the Montney Basin, as it moves to acquire those of Talisman Energy for an estimated cost of $1.5 billion. March 12, 2014. Petronas completes another Montney acquisition for a further $130 million. The company now holds a half-million hectares of natural gas leases in the basin. The cumulative outlay to date exceeds $8 billion. Spending $2 Billion per year on Drilling[AB1] .

#6. New investment into BC’s liquefaction plants. Money is being poured into BC’s LNG plants. Hundreds of millions of dollars is being invested into the plants themselves and even more is being invested into the infrastructure to get the natural gas to these liquefaction plants.

#7. This is just the beginning. Petronas is only ONE of 18 Major LNG Projects Planned for NE BC. If we consider this Petronas deal as the first domino in a series of dominos, we can barely imagine the boom-level growth that could flood into Northeast BC.

In every growth story, you need to first consider the strong foundation that should exist. This gives investors the peace of mind that, even if the LNG boom doesn’t happen as quickly or pervasively as expected, this region isn’t going to be sent back to the stone age. That’s the case with Northeast BC, a region that is highly diversified.

In every growth story, you also need to consider potential driving force that could push the region forward. That story is very clearly LNG since this region sits on the third largest hydrocarbon resource in North America.

The world’s major economies desperately need natural gas and are investing billions into this region. That flow of money – currently and more so in the years to come – should give us one of the biggest clues into the potential growth story of this region.

As always, investors should do their own due diligence to decide whether this is the right place to invest for them. But the numbers are speaking loud and clear to me.

Chris Biasutti is the Vice President of Sales & Marketing for Western Canadian Properties Group and has developed a keen sense of evaluating high growth investment opportunities and is passionate about sharing this information with clients on how to best identify, analyze and select alternative investment opportunities and maximize the performance of their real estate portfolios.  He has assisted his clients in acquiring over $100M of investment real estate across a variety of asset classes, including residential investment real estate, mortgage investment corporations and residential land developments.  Contact him at: Chris@bluewaterinvestments.ca.

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