May 2, 2012 / 6:38 PM / in 5 years

UPDATE 2-Imperial Oil eyeing Canadian LNG plant

* Company studying possible LNG export plant

* Looking to tap Asian markets for shale gas

* One of a number of companies that may develop LNG plants

* May be LNG option for Arctic gas reserves

* Shares edge lower

By Scott Haggett

CALGARY, Alberta, May 2 (Reuters) - Imperial Oil Ltd is considering joining a growing number of companies planning liquefied natural gas plants on Canada’s West Coast as a way to boost returns on vast reserves of natural gas in British Columbia and Alberta, its chief executive said on Wednesday.

Imperial CEO Bruce March told reporters after the company’s annual meeting that planning for such a development is still in the “very early days” but that a plant could take gas from the Horn River shale-gas field it is developing along with its majority owner, Exxon Mobil Corp, as well as other fields, and send it to high-paying Asian markets.

“The good thing we look at, in terms of LNG from Western Canada, is there appears to be huge and substantial growth opportunities for gas demands in Asia,” March said. “That’s the most promising sign. That combination, with the near-term outlook for gas ... makes this an opportunity that a lot of companies are looking at, including ours.”

Northeastern British Columbia contains massive reserves of natural gas trapped in shale, with fields like the Horn River and the Montney containing hundreds of trillions of cubic feet of the fuel.

However, Western Canadian producers are being pushed out of their traditional American markets by low-cost U.S. shale-gas supplies. That has prompted a number of companies to look for overseas buyers for the fuel.

Canadian regulators have already awarded LNG export licenses to two proposed LNG producers; Kitimat LNG, owned by gas-producers Apache Corp, Encana Corp and EOG Resources Inc, and BC LNG, backed by a cooperative of gas producers as well as B.C.’s Haisla First Nation.

Other companies, including Royal Dutch Shell Plc, and Malaysia’s Petroliam Nasional Bhd (Petronas) are also in the early stages of planning their own liquefaction facilities.

March said that building an LNG facility would require intensive drilling on its Horn River lands to feed the plant. That could be a disadvantage, given that other LNG producers in Qatar, Australia and elsewhere can tap big reserves with fewer wells than shale-gas developments require.

“This is a much different development with shale gas as your gas source than any of the LNG developments that are built in the world today,” he said. “The amount of commitment and the amount of spending required to support this for a 40-year life is significant ... This is a commitment to sustained drilling activities that practically never stop.”

ARCTIC LNG OPTION

March also said that gas reserves in Canada’s far north may be suitable for LNG development with economics for the long-delayed Mackenzie Valley gas pipeline to southern markets in question.

Imperial and its partners in the C$16.2 billion Mackenzie Gas Project, which would tap gas reserves in the Mackenzie River’s Arctic delta, have struggled to find a way to find a way to build the line since gas prices collapsed.

The Mackenzie pipeline project won regulatory approval in 2011 following a seven-year review, but Imperial and the line’s other backers; Royal Dutch Shell, Exxon Mobil, ConocoPhillips and the Aboriginal Pipeline Group, have not given a corporate green light to it as North American gas prices languish near 10-year lows.

Talks with the federal government aimed at getting financial support for the project have stalled, March said.

Liquefying the Mackenzie gas could get those reserves to market, but March offered few details on the company’s plans, saying only that it was unlikely to build an export facility in the remote region.

“Mackenzie could play in a world-scale LNG development but it’s too early for us to comment on that today,” March said.

Imperial shares fell 4 Canadian cents to C$45.93 on Wednesday on the Toronto Stock Exchange.

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