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Cancelled LNG project hits Canada’s largest shale play

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LNG Industry,

According to the latest Reuters report, Petronas' decision to cancel its Pacific NorthWest LNG project is a blow to the growth outlook for Canada's largest shale play, eliminating a potentially huge source of future gas demand.

Gas from the Montney shale play in western Canada would have supplied the CAN$36 billion project in northern British Columbia (B.C.). The project would then have shipped 12 million tpy of LNG to Asia.

Instead, Petronas subsidiary Progress Energy will keep developing and selling gas from its vast Montney position into a North American market where prices have been languishing at historically low levels.

Any increase in production from Progress, which holds the largest land position in the Montney, will weigh on prices in western Canada, while the loss of a major source of demand means much of the play's potential could go untapped.

The Montney, which covers 50 000 square miles of northeastern B.C. and northwestern Alberta, currently produces around 4 billion ft3 a day of natural gas and even without LNG will grow to around 5 billion ft3 a day.

But that forecast falls well short of the 8 billion ft3 a day of production expected when Pacific NorthWest LNG and Royal Dutch Shell's LNG Canada projects looked likely to proceed.

The Montney still remains one of the top shale plays in North America. Producers like NuVista Energy and Seven Generations Energy have secured capacity on export pipelines to markets across North America like the Dawn hub in Ontario, Chicago and the US Gulf Coast.

But a glut of gas and plans by Progress to keep selling into an over-supplied market instead of to Asia will keep pressure on prices.

Hopes for reviving at least part of Canada's LNG dream are now with Shell's LNG Canada project, which will make its investment decision next year.

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