Varcoe: LNG projects stuck in limbo, but B.C. still confident of success
|calgaryherald.com 19 Oct 2016 at 06:31|
B.C. deputy premier Rich Coleman is confident liquefied natural gas projects proposed in his province will go forward. Carmine Marinelli / Carmine Marinelli/QMI Agency
British Columbia deputy premier Rich Coleman is busy travelling in Asia this week, meeting with LNG proponents about projects proposed for Canada’s West Coast.
It will be a more pleasant trip than the one he made this spring.
Back then, questions were flying over why federal approval for the mammoth Pacific NorthWest LNG project was taking so long, as Ottawa gave the proposal further environmental scrutiny.
But last month’s green light from the Trudeau cabinet has breathed new life into the dreams of building liquefied natural gas export facilities in B.C., Coleman insists.
This week’s trip to Asia includes meetings in Kuala Lumpur with senior officials from Petronas, Malaysia’s state-owned energy company and the main proponent behind the $36-billion Pacific NorthWest LNG development at Prince Rupert.
“The permit itself was an important thing to get to,” Coleman, who’s also B.C’s minister of natural gas development, said in a recent interview in Calgary.
“This is the one everyone globally was looking at saying, ‘How long is it going to take?’ ”
The dreams of Christy Clark’s government to turn her province into an LNG powerhouse took off in 2012 with much hype and even more hope. It included promises of up to 100,000 jobs and talk of a $100-billion prosperity fund for the province.
About 20 LNG projects have been proposed, yet nothing has been built.
Debate has turned in recent months to whether Canada has missed the boat for LNG development, dithering while other countries passed us by.
As the Clark government has learned, large-scale energy developments are incredibly complex, affected by volatile commodity prices, evolving government regulations, increasing environmental oversight, concerns about greenhouse gas emissions and intense competition for capital.
Some projects have already been put on hold due to low LNG prices amid a global oversupply.
For example, the Shell-led LNG Canada project announced in July that it would delay a final investment decision beyond 2016 on the development, which could cost up to US$40 billion to build.
Pacific NorthWest LNG, viewed as one of the best prospects for success in Canada, was stuck in a holding pattern as it went through a lengthy federal environmental review that began in 2013.
“When I was in Asia (in May) it was really a question about … are you guys open in Canada for business,” said Coleman, the veteran MLA for Fort Langley-Aldergrove.
“But there is a bit of a sigh of relief among the Asian partners in that project and others saying, ‘OK, now we know that we can get this sort of thing done in Canada.’ ”
After last month’s federal approval, Petronas stated it would study the 190 conditions imposed by Ottawa and review the project before deciding on its next steps.
While there’s been speculation the company won’t move ahead due to low LNG prices and its own shrinking capital spending plans — or it may try to sell off its interest in the venture — Coleman isn’t concerned.
But it’s far from a slam dunk.
A slowdown in the demand growth for gas globally, a “tsunami of new LNG supply entering the market,” and low oil prices are conspiring to keep liquefied natural gas prices low for the rest of the decade, according to a recent Conference Board of Canada report.
The think-tank predicts LNG prices will be mired below US$10 per gigajoule over the next four years, well off the $16 mark seen just a few years ago in Asia.
Global LNG investment expanded at 11 per cent annually over the past decade, totalling some US$200 billion, but it’s projected to fall to $4 billion by 2020.
Yet the drop in investment over the next four years could eventually bolster the need for new projects to meet global demand for gas in the next decade. “That’s where Canada’s opportunity lies,” the report concluded.
For Western Canadian producers, getting an export facility built would unlock new markets for their gas, an imperative given the shale gas boom that’s taken place in the United States.
“As a Canadian, I think it’s important to have LNG exports and open up new markets. You can see the huge demand for LNG that will be needed in places like China and Japan,” Shell Canada president Michael Crothers said recently.
“Right now, the market doesn’t look very good, but it will always turn. This is part of the dynamics of our sector.”
Industry analyst Martin King of GMP FirstEnergy said the next window of opportunity for LNG development in Canada is six or seven years down the road.
It’s likely a 50-50 prospect on whether Petronas and its partners proceed with Pacific NorthWest; at most, B.C. could see two or three projects go ahead around the 2025-2027 time frame, he said.
“There are no guarantee any of these projects will go ahead,” King said Tuesday.
But Coleman remains confident he’ll see some progress by the end of this year. During a speech in Calgary last week, he estimated three major projects and another three or four smaller ones would advance.
“We are on the cusp of success,” the minister told the audience.
For Western Canadian gas producers, let’s hope he’s right.
But as the B.C. government has learned after much hoopla, nothing is certain when pursuing energy mega-projects.