Achi news desk-
Persistent drought conditions are poised to challenge natural gas producers even as they aim to ramp up in anticipation of the opening of Canada’s first liquefied natural gas export terminal, a new report warns.
A Deloitte Canada report identifies potential water shortages in Western Canada as a key risk facing the oil and gas sector in 2024.
Some of the most extreme drought conditions right now are in northeastern BC and northwestern Alberta, a region that is the epicenter of Canada’s natural gas drilling industry.
The report notes that the Alberta government has already established a drought advisory panel to begin water use discussions, while BC Premier David Eby called his province’s situation “the most dramatic drought conditions we’ve seen.”
Water use is important to the natural gas industry – most developments in Canada today involve hydraulic fracturing, a process that uses a combination of water, sand and chemicals to develop pathways to bring the gas to the face
And the drought comes as the industry anticipates an increase in demand for natural gas, coinciding with the expected opening of Canada’s LNG facility in Kitimat, BC sometime next year.
“It’s very interesting to see, because this is the moment that the natural gas industry has been waiting for for 10 years, and now we have another complication,” said Andrew Botterill, national leader of oil, gas and chemicals at Deloitte Canada.
The $40 billion Canadian LNG project will transport liquefied natural gas overseas and open up Asian markets to Canadian natural gas for the first time.
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Much of the $5 billion in capital spending predicted to occur in BC by oil and gas producers in 2024, according to the Canadian Association of Petroleum Producers, will be driven by natural gas drilling to supply Canada’s LNG as a completion date’ the project is getting closer.
“I still think that companies, especially those that are committed to putting volumes of gas into a very expensive LNG plant that has been built, will meet all those requirements … It’s going to be more difficult work and will probably involve some additional costs in terms of water management. ” said Botterill.
In December, Alberta’s Energy Regulator warned the oil and gas industry that they could face limited access to water in the event of a severe drought in 2024. The provincial government has already launched negotiations aimed at trying to get major users to reach water-sharing agreements .
Meanwhile, the BC Energy Regulator has given industrial water license holders advance warning of the potential for water restrictions if conditions worsen.
Botterill said as restrictions come into effect, gas developers will need to explore increased use of alternative water sources. Using recycled water – which involves treating and reusing previously used fracking fluid – is an option, but is usually more expensive and technically more complex than using fresh water.
In 2022, according to the Alberta Energy Regulator, just over one percent of water used by hydraulic fracturing operations was recycled water, with the remaining 99 percent being mostly fresh water.
“I think we’re going to see companies being able to cope, but there’s going to be a lot more work going into it,” said Botterill.
“I see it as an expense and a complication to operations.”
& copy 2024 The Canadian Press
