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Woodfibre LNG Approval More Likely a One-Off, Not a Trend: Analysts

Wikimedia Commons
Wikimedia Commons

The recently-approved Woodfibre liquefied natural gas (LNG) export project is more likely to be a one-off development than the start of the development boom critics have feared, and on which British Columbia Premier Christy Clark has largely staked her political future.

It is the first of more than a dozen LNG projects proposed for British Columbia to get the final go-ahead,” Reuters reported earlier this month. “But analysts say Woodfibre is unlikely to herald an investment surge from other developers given the challenging economics of an oversupplied LNG market.

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Wood Mackenzie analyst Dulles Wang said the two other companies behind upcoming LNG decisions, Petronas and Royal Dutch Shell, both have to wait for a go-ahead from the private investors that are backing them. “Woodfibre is a private company, they are funding this project by themselves, and they are not looking to the debt or equity markets for financing.”

Further decisions may well be shaped by a persistent slump in global natural gas prices. “The biggest hurdle facing both of them is still cost and oversupply,” said analyst Chris Cox of Raymond James. “Given how oversupplied the LNG market is, it’s tough to make the economics work for a project of that size.”

And according to a Reuters report from the London Business School’s 13th Global Energy Summit, that barrier may not clear anytime soon. Angela Hepworth of EDF Energy said she saw a promising future for natural gas because “gas capacity is not low-carbon, but it is very flexible.” But Tara Schmidt, principal consultant at Environmental Resources Management, said that (apparent) advantage may be offset by the rise of affordable renewable energy and energy storage.

“The big question for gas is if we’re going to see that golden age of gas, as the IEA called it so many years ago, or if we’re actually going to see gas impacted as we’ve seen in some markets for renewables growth, and also from energy storage as technology starts to advance,” Schmidt told participants.