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Progress Energy slashes spending due to Pacific NorthWest LNG delays

LNG groups say the cuts are ‘alarming’
lan Yu (centre) says news that Progress Energy is cutting spending in the B.C. oilpatch is "alarming" | Photo: Matt Preprost, Alaska Highway News

As it awaits a decision on Pacific NorthWest LNG, gas driller Progress Energy said it is drastically cutting its spending on the project, from $5 billion over the next three years to $500 million in the next two years.

An organizer with a pro-LNG group in Fort St. John says he's "alarmed" by news.

"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." 

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' 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. 

“Spending in Progress Energy’s upstream activities has been reduced to approximately $500 million in 2016,” Progress said in a statement emailed to Business in Vancouver.

“This reduction in spend has had a significant impact on activity levels, resulting in less utilization of contractors and service providers in Northeast British Columbia.”

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 said he believed a three-month delay on Pacific NorthWest’s environmental review, announced in March, was "100%" 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."

Alaska Highway News

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