In a previous article, “Northeast BC: Investing Money In An Overlooked Region,” I started laying out a few reasons why one should invest money in Northeast BC, also known as the Peace Region. In this article I want to show you that Northeast BC is poised for serious, explosive growth in the next few years, and that it is going to be driven largely by oil and gas, specifically by Liquefied Natural Gas (LNG). As such, I continue my endeavour to explain why investing in property here is an intelligent decision.
First, here’s a quick primer in oil, gas, and LNG: Oil and gas are extracted from hydrocarbon deposits in the ground. Although oil can be shipped in its natural liquefied state, natural gas is easier to ship if it is liquefied. Therefore, natural gas liquefaction plants turn natural gas into LNG, where it is shipped to its destination, and then the LNG goes through regasification to turn it back into a gas and get it out to consumers.
Here are seven reasons why LNG is going to transform this region, and create new jobs. As such it will drive a massive shift in housing, which will equate to real estate investment opportunities for those who are paying attention and getting in early (an important tip for those investing in property).
#1. We’re only seeing the beginning of natural gas demand. There has been some growth in Northeast BC’s natural gas industry but it is largely driven by domestic demand. Even more surprising, it’s been about replacing the dwindling supply rather than meeting new demand. However, this is changing because…
#2. Northeast BC is sitting on top of a MASSIVE hydrocarbon reserve. The Montney Basin in Northeast BC is the third largest hydrocarbon resource in North America.
#3. The US wants natural gas. Americans have pressured their politicians to ease dependence on foreign oil but primarily that means Middle East oil. Canada is not considered a foreign nation, especially since we share some critical resource basins (like Bakken). So the US needs North American resources. In fact, 80% of all new power capacity built in the US is expected to run on natural gas. Yes, there are sources in the US but Canada is poised to supply some of that natural gas.
#4. China is thirsty. China’s natural gas consumption has been more than double its production for more than a decade. And this is projected to get even worse, as its consumption is expected to be more than triple its production in the next ten to 15 years. China is energy-thirsty! China has invested in new LNG plants even though they didn’t have a source for LNG. They knew they would need it so they built it, and then they started looking for LNG. There are three major sources of LNG supplying China: The Middle East, Australia, and Canada. Canada is the more attractive choice.
#5. China is investing in LNG in Canada. Petronas acquired Progress Energy for $5.5 billion to develop its vast land holdings in the Montney Natural gas formation in Northeastern BC. On November 8, 2013, Petronas continued to expand its holdings in the Montney Basin, as it moved to acquire those of Talisman Energy for an estimated cost of $1.5 billion. On March 12, 2014, Petronas completed another Montney acquisition for a further $130 million. The company now holds a half-million hectares of natural gas leases in the basin. The cumulative outlay to date exceeds $8 billion.
#6. New investment into BC’s liquefaction plants. Money is being poured into BC’s LNG plants. Hundreds of millions of dollars is being invested into the plants themselves and even more is being invested into the infrastructure to get the natural gas to these liquefaction plants.
#7. This is just the beginning. Petronas is only one of 18 Major LNG Projects Planned for Northeast BC. If we consider this Petronas deal as the first domino in a series of dominos, we can barely imagine the boom-level growth that could flood into Northeast BC.
In every growth story, you need to first consider the strong foundation that should exist. This gives investors in property the peace of mind that, even if the LNG boom doesn’t happen as quickly or pervasively as expected, this region isn’t going to be sent back to the stone age. That’s the case with Northeast BC, a region that is highly diversified.
You also need to consider the potential driving force that could push the region forward. That story is clearly LNG, since this region sits on the third largest hydrocarbon resource in North America.
The world’s major economies desperately need natural gas and are investing billions into this region. That flow of money should give us one of the biggest clues into the potential growth story of this region.
As always, investors should do their own due diligence to decide whether this is the right place to be investing in property. However, the numbers are speaking loud and clear to me.
-Chris Biasutti