Did you hear the news?
Did you hear the big news last week? PetroChina, the state-owned Chinese energy firm paid $5.4 billion for a 50% stake in Encana’s production in the Cutbank Ridge. It was another big announcement featuring big money made by big companies directly affecting our community. Those announcements are always exciting.
Over the past few years we’ve had our share of big announcements. Last July Apache bought out British Petroleum’s interests in the area for and estimated $3 billion. In July 2008 Shell bought out Duvernay for $5.9 billion. Sales records for land leases are continuously being broken. Etc. etc. Good times.
All of this has been happening with gas prices being seriously depressed. Hedge fund managers and investment bankers are “Bearish with a Capital ‘B’ in Gas” (Bloomberg.com – Feb. 13). Traders constantly point to a massive oversupply of natural gas on the market leading to soft prices. Yet these massive companies continue to invest huge amounts of money in shale gas exploration and production. Most important to us, why do they continue to invest such huge amounts of money around our little town?
Here’s the thing – the rules of energy production and consumption are changing rapidly as we speak. I am by no means an expert on this subject, but this is how I understand it. Natural gas has gone from being the wall flower to the prom queen at the energy dance in a few short years. Shale gas deposits are proving to be both vast and economical. They are also located outside of the middle east in politically stable countries like Canada and the United States. Natural gas burns cleaner than coal, making it an attractive source of power generation, and, despite the flaming tap water in Gasland, by most accounts its extraction is relatively environmentally friendly – compared with something like coal or oil sands.
Exxon-Mobil, the world’s largest energy company has invested $25 billion in shale gas companies over the past few years. In a recent report released by the company they estimate that natural gas will supply 25% of the world electricity. They also estimate that demand for natural gas in China will increase by 600% in that time frame. More on this subject later.
Boone Pickins, a Texas-based octogenarian billionaire is spending millions of his own dollars promoting “The Pickins Plan” – a detailed and executable plan to get the U.S. off of middle-eastern oil within 10 years. Central to his plan is getting every 18 wheeler in North America running on natural gas. He has the ear of Barak Obama and is even consulting to China! (Check him out at www.pickensplan.com) The point is that new technology has allowed us to get at massive gas reserves. Access to these massive new supplies is making it economical to use natural gas where we didn’t before.
Where we live is proving to be a profitable gas play in which to operate. Thus, the money flows in our direction. The fact that the most recent investment was from PetroChina – the Chinese state run oil company, will most likely accelerate the development of the Kitimat LNG terminal. That opens up the vast Asian market for the resources that are produced in our region. Remember the estimated 600% increase in Chinese demand by 2030? Opening ourselves up to the Asian market is a really big deal.
Continued private investment in our community bodes very well for Dawson Creek real estate. It means that we should continue to have strong job growth. That means that there will be people coming here and those people need places to live. Last week I wrote about the perils of trying to predict the future of Dawson Creek real estate. After announcements like the one we got last week I changed my mind. I’m very optimistic about our prospects.
Kevin Kurjata is a Dawson Creek Real Estate Specialist with Remax Dawson Creek Realty. He can be reached by phone at 250.719.3538, email at email@example.com or visit him online at www.kevink.ca. He is currently accepting new clients.