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Canadian gas grabbers get warning
TransAlta acquires Heartland Generation, Cresent Point buys Hammerhead Energy; Canadian government support of growth questioned
Gary Park for Petroleum News
Consolidation of Canada's natural gas sector continued apace with two more deals of significance in the first half of November despite a stern forecast of shrinking global gas demand over the next six years.
TransAlta, the most powerful gas utility in the province of Alberta, added to the rapid transformation and turmoil sweeping across the electricity industry with a C$658 million acquisition of Calgary-based Heartland Generation. That deal was followed by Crecent Point Energy inking a blockbuster purchase of Hammerhead Energy for C$1.86 billion, to solidify its place as the dominant player in the Montney field of northern British Columbia and Alberta, one of North America's largest unconventional petroleum plays.
"We're excited about this strategic consolidation opportunity and the future outlook for the company," said Crescent Point CEO Craig Bryska. "We believe this acquisition solidifies the company's outlook by establishing a dominant position in one of North America's premier reservoirs."
As a result, Crescent Point will acquire 105,000 acres and 800 drilling locations in the Montney region, making the company the largest landowner in the volatile Montney fairway, and increasing its production by 200,000 barrels of oil equivalent per day once the deal closes in December.
In 2021, Crescent Point acquired Shell Canada's Kaybob Duvernay assets in the Montney region for C$900 million and has made additional purchases since.
TransAlta TransAlta has placed a series of big bets tied to its natural gas-fired power generation in Alberta, with plans which include cogeneration plants and hydrogen and carbon capture and sequestration facilities as well as buying a fleet of gas-generating assets from U.S.-based investment firm Energy Capital Partners, the parent firm of Heartland.
"We do see continued penetration of renewables and believe that gas is going to continue to have a role," said TransAlta CEO John Kousinioris.
The company has a large portfolio of electricity-generating assets with more than 6,600 megawatts of capacity coming from 72 facilities in Canada, the United States and Australia, including 17 gas-fired plants.
Bleak gas outlook These deals coincide with a bleak outlook for gas painted by Nicole Duasyk and Jessica Kelly, two senior policy advisers for the International Institute for Sustainable Development, writing in the Globe and Mail.
They said the International Energy Agency has confirmed it is time for Canada to end public support for the fossil fuel industry, by eliminating subsidies for liquefied natural gas expansion across Canada, including for LNG Canada that has already received more than C$6.5 billion in public support from federal and provincial governments.
"Global demand outlook for natural gas (including LNG) has been progressively revised downward in the policy scenarios of the past four World Trade Organizations annual editions," they wrote. "This year's report is also the second to project an absolute decline in global natural gas demand by 2030."
The two advisers said there is "no evidence that Canada's LNG will find demand in an oversupplied and shrinking market."
They noted that the pipeline for TC Energy's Coastal GasLink, which is supposed to feed LNG Canada, was recently completed despite significant opposition that assumes strong demand is on the verge of decline, along with opportunities to support European and Asian energy needs.
The urgency to build is misplaced, they said. "The forecasts and analysis just don't support the hype."
They wrote that if the World Energy Outlook "makes anything clear- it is that the future is in renewables and electrification. Public support in Canada and abroad should flow only to long-term energy solutions such a solar, wind and electric heat pump," the advisers said.
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