'Bad to worse': LNG group calls Progress Energy cuts 'alarming'

Gas driller will cut billions amid delays on Pacific NorthWest LNG

An organizer with a pro-LNG group in Fort St. John says he's "alarmed" by news that gas driller Progress Energy is drastically cutting spending as it awaits a decision on Pacific NorthWest LNG.

"From a starting point of already bad, this is worse," said Alan Yu of Fort St. John for LNG. "The light at the end of the tunnel is dimming."

On Wednesday, Progress Chief Executive Officer Michael Culbert told the Financial Post the company was planning major upstream cuts amid delays
in federal environmental approval for Pacific NorthWest LNG.

Progress is the most-active gas driller in British Columbia, according to the B.C. Oil and Gas Commission. In 2014, Progress drilled 203 wells in the B.C. Montney formation—roughly one-third of all wells in B.C. The company has spent $5-billion proving wells in the Montney over the past three years.

Malaysian oil and gas giant Petronas, Progress's parent company, has yet to make a final investment decision on Pacific NorthWest, which would be one
of the largest LNG facilities proposed for the B.C. coast.

"The plan with the final investment decision (FID) moving forward was another $5 billion in the next three years moving into the development phase," Culbert told the Post. "We are going to drop that (figure) down to somewhere around $500 million over the next two years—so a significant drop."

The project would secure a world price for B.C. gas at a time when the province's biggest customer—the U.S.—races towards self-sufficiency in natural gas production.

However, Pacific NorthWest is controversial for its location near sensitive juvenile salmon beds and its upstream greenhouse gas emissions, which under the Trudeau government are now considered in environmental assessments.

Yu said the cuts would have big impacts Northeast B.C., which in March had the highest rate of unemployment in the province.

Yu started FSJ for LNG earlier this year to protest what he sees as unnecessary delays in the regulatory process, after being laid off from a job programming two-way radios used in the oilpatch. Yu believed a three-month delay on Pacific NorthWest's environmental review, announced in March, was "100 per cent" behind Progress's decision to make cuts.

He said the uncertainty over where B.C. will sell its gas is taking a toll on Fort St. John.

"I'm pretty worried a lot of people will move out (of Fort St. John) because of this," adding he put off buying a house this year. "I'm willing to wait this out…(but) if the government says no to any LNG industry in Canada…I may have to consider moving."