utica shale energizes deal frenzy in ohio , page-5

Another interesting article regarding the Utica shale and the reason for opposition.

National roots entangle Quebec’s shale gas ambitions.

Opposition is more "nationalistic" than environmental, former association head says

BY JEFF LEWIS
November 01, 2011

Andre Caillé had had enough. At a public meeting on the outskirts of Saint-Hyacinthe, Quebec, east of Montreal, the former chief executive of Hydro-Quebec was midway through an unpopular sales pitch when he decided to call it quits. It was September, 2010, at the end of a whistle stop tour of the St. Lawrence Valley arranged by the brand new Quebec Oil and Gas Association (QOGA). In town halls and community centers, in a region more accustomed to producing fine cheese and fresh vegetables than oil and natural gas, Caillé had tried in vain to convince locals that shale gas was not a harbinger of environmental doom. “Nobody was listening,” he says.

Within a year, he had left his post as president of the fledgling industry association for a less public role as a strategic advisor to Junex Inc., one of several junior operators to have quietly accumulated significant land holdings in an Appalachian basin called the Utica shale. The unenviable task of selling fossil fuels to a hydro-rich province now rests with former Parti Québécois premier Lucien Bouchard. “He’s a charismatic leader as a politician, so the people will listen to him,” Caillé believes.

But charisma alone did not win Bouchard his latest job. In Quebec, objections to shale gas are only partly driven by a fear of the unknown. Less acknowledged, Caillé says, is an old rift about the role of government in the development of the province’s natural resources, a tension that traces its roots to the wave of nationalization that created Hydro-Quebec and the so-called Quiet Revolution of the 1960s under the Liberal government of Jean Lesage. “It’s a frustration relative to who’s going to get access to that value,” Caillé says, describing shale gas as “very, very significant” for the province. “It’s much more of a nationalistic point of view than an environmental point of view. That has not been said up to this date.”

It is a measure of how politically sensitive natural gas has become in Quebec that Michael Binnion is learning to speak French. “It turns out to be harder than you think,” the president and chief executive of Questerre Energy Corp. says, describing the language classes. “It’s actually gone pretty well. I can carry on a basic conversation.”

These days, the Calgary shale gas developer is busy communicating a new business strategy to wary investors. With the exception of Talisman Energy Inc., shares of the few companies actively working to tap the Utica – estimated to contain anywhere from nine to 41 trillion cubic feet of natural gas – have been battered since the province slapped a de facto moratorium on hydraulic fracturing operations last spring. “I think that changed expectations and punished our stock price quite a lot,” Binnion says.

The pain was swift and deliberate. On March 9, as Quebec’s environment minister announced the province would take at least two years to study the effects of shale gas operations on the environment, Questerre shares fell 25 per cent to $1.20 on volume of 2.9 million, or more than eight times the volume of trades conducted one day earlier. By September, the company’s market capitalization had shriveled to $192.6 million, and its shares were trading at just 83 cents a unit, despite a year of aggressive buybacks.

Binnion and Questerre have not stood still. The firm has since redirected the bulk of its capital program to focus on a “tight” oil property in southern Saskatchewan called Antler, targeting production of between 1,500 and 2,000 barrels per day by 2013. After spending an additional $13.2 million on undeveloped land in the region and simultaneously divesting from a prospective gas project in northeastern British Columbia, Questerre is actively looking to expand its reach to shale oil properties elsewhere in North America. “Oil from shale is emerging and we think there’s going to be a lot of development in that area,” Binnion says.

In the meantime, the company has recruited former Parti Québécois leader Andre Boisclair as a strategic advisor while it works to brand itself as more than a pure-play Quebec story, a strategy Binnion concedes has been “disappointing” in the short term. He’s confident the current antipathy toward shale gas will subside, despite market sentiment and the bruising Questerre stock has taken in recent months. “The valuations are implicitly looking like the market is giving somewhere close to a zero per cent chance of success in Quebec, and that seems way out of whack,” he says. “It’s more likely than not that we will be successful in Quebec. We just don’t have a guarantee.”

Few expect commercial production from the basin before 2015. By then, at least, the political winds may have shifted in favor of shale gas. Caillé is not giving up. He allows that the sector’s prospects appear dim today, but notes that public sentiment in Quebec – especially as it relates to politics – can be fickle. “I’m staying involved, because yes, it may appear to be very negative at this time, but let’s not forget that things change very fast in Quebec.”

It’s quite a lengthy but interesting read. Here’s the link to the full article…

http://www.albertaoilmagazine.com/2011/11/meet-andre-caille-the-man-at-the-center-of-quebec%E2%80%99s-shale-gas-controversy/