Varcoe: 'It's heading the appropriate manner' — A $1.4B takeover and LNG progress enhance outlook for Canada's largest gasoline producer

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It’s been a busy few days for Tourmaline Oil Corp. CEO Mike Rose, whose firm introduced a $1.45-billion takeover this week — one of many largest in its 15-year historical past — after which noticed a proposed LNG challenge it’s supporting take one other step ahead.

For the nation’s largest pure gasoline producer, it feeds right into a bullish image for the commodity. At the same time as short-term gasoline costs in Western Canada stay sluggish, the prospects for liquefied pure gasoline developments within the nation are strengthening.

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“I feel the second half of this decade goes to be sensible for pure gasoline costs since you get LNG beginning up in Canada (and on) the U.S. Gulf Coast . . . there’s going to be an enormous requirement for nat gasoline,” Rose mentioned in an interview Friday.

“It’s going to be a good time to be within the nat-gas enterprise for all of the Canadian producers.”

Based in 2008, Tourmaline has grown quickly to change into the fifth-largest gasoline producer in North America. It operates in three foremost areas In Western Canada and Tourmaline’s every day output was forecast to common about 520,000 barrels of oil equal (boe) per day this yr.

That was earlier than the corporate unveiled an acquisition this week that may propel Tourmaline’s output above 600,000 boe a day by yr’s finish.

The Calgary-based producer introduced the acquisition of Bonavista Power Corp., with the provide consisting of $725 million in money and $725 million in inventory.

Bonavista has operations within the Alberta Deep Basin, close to a few of Tourmaline’s current property. It produces greater than 60,000 boe per day, primarily pure gasoline.

Tourmaline has grown primarily by way of the drill bit, however has augmented it with M&A exercise, together with the $1.1-billion buy of Black Swan Power two years in the past and the $630-million acquisition of Jupiter Assets in late 2020.

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In 2016, it purchased property from Shell Canada within the Alberta Deep Basin space and Montney properties in British Columbia for $1.4 billion.

Rose mentioned Tourmaline will doubtless preserve Bonavista’s manufacturing close to present ranges in 2024. He anticipates pure gasoline costs to stay risky by way of this yr and certain subsequent yr.

(On Friday, U.S. benchmark worth dipped six cents to shut at US$2.90 per million British thermal models. In Alberta, AECO pure gasoline costs sat at US$1.73 per thousand cubic toes on Thursday.)

Nevertheless, the pricing dynamic ought to enhance with the anticipated operation of the LNG Canada challenge off Canada’s Pacific Coast starting in 2025.

“When LNG Canada begins up, we see that’s in all probability a constructive occasion for in-basin pricing right here, after which that may in all probability be the appropriate time to develop the Bonavista property a bit of bit,” Rose added.

For years, Canada has aspired to change into a serious LNG exporter, though the nation has been gradual to enter the sector. Solely two initiatives are underneath building: the large Shell-backed LNG Canada improvement and the smaller Woodfibre LNG initiative in British Columbia.

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In the meantime, the US has accelerated rapidly to change into the world’s largest exporter of liquefied pure gasoline, averaging 11.6 bcf per day of exports through the first half of this yr, topping Australia and Qatar.

A remaining funding determination in Canada is anticipated later this yr on the proposed $3.3-billion Cedar LNG improvement — a proposed floating liquefaction facility close to Kitimat — which is a partnership between the Haisla Nation and Pembina Pipeline Corp.

Earlier this week, Ksi Lisims LNG filed its utility with the British Columbia authorities to obtain an environmental evaluation certificates for the proposed improvement within the province’s northwest nook.

The Ksi Lisims challenge is a partnership between the Nisga’a Nation, Western LNG and a consortium of home pure gasoline producers known as Rockies LNG Companions, which incorporates Tourmaline and Bonavista.

“It’s completely a major step ahead as a result of it’s the fruits of years of labor,” mentioned Rebecca Scott with Ksi Lisims LNG.

As proposed, the challenge would come with two floating liquefaction, storage and off-loading barges, able to producing as much as 12 million tonnes of LNG per yr, with gasoline destined for patrons in Asia. The challenge would use between 1.7 and two bcf of gasoline per day, which might be transported by way of a pipeline from northeastern B.C. to the Pacific coast.

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Relying on regulatory approval, a remaining funding determination would doubtless happen in 2025, with building on the challenge — beforehand estimated to price between $8.3 billion and $9 billion — anticipated to take about three years to finish.

Apart from Tourmaline, the Rockies consortium additionally contains Benefit Power, Birchcliff Power, Crescent Level Power, NuVista Power, Ovintiv, Paramount Assets, and Peyto Exploration & Improvement.

“The rationale why producers wish to LNG is that there’s this worldwide demand for the gasoline — and recognition that it’s going to be a vital a part of the power transition,” Charlotte Raggett, president of Rockies LNG, mentioned in an interview.

At Tourmaline, Rose has lengthy been a proponent of LNG improvement within the nation. The corporate additionally has a long-term deal in place to ship a few of its gasoline to a Cheniere Power LNG export facility on the U.S. Gulf Coast, which it started doing in January.

Whereas the Worldwide Power Company has projected world pure gasoline demand will plateau later this decade as decarbonization efforts intensify, Rose sees the necessity for extra product to displace higher-emitting coal that’s utilized in Asia.

Tourmaline joined Rockies LNG in August and Rose sees the prospects for Canadian-based LNG are enhancing.

“It’s heading the appropriate manner,” he added. “It’s by no means quick sufficient. However we’re going push exhausting to develop the enterprise.”

Chris Varcoe is a Calgary Herald columnist.

[email protected]

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