Backers of nearly two dozen Canadian liquefied natural gas (LNG) export proposals received a “bleak” perspective on markets for their product from the national energy regulator—but a somewhat more positive one from the Reuters news agency.
The National Energy Board’s new assessment of global LNG markets concludes that Canada has largely missed the moment of peak opportunity, the Globe and Mail reports, with falling gas prices making it hard to justify new investment.
“The majority of the near- to medium-term increases in supply will come from capacity already under construction in Australia and the U.S., which combined account for 75% of capacity under construction worldwide,” the NEB study determined. “This will secure Australia and the U.S., along with Qatar, as the world’s largest LNG exporters in the next decade.”
Of two dozen proposals to export Canadian LNG that the NEB has tracked, only one—Woodfibre LNG’s relatively small-scale plant on a former pulp mill site near Squamish, B.C.—has received a commitment to start construction. Seventeen others are on drawing boards in British Columbia but have not been green-lit. Three more such projects are awaiting commitments in Nova Scotia, with another couple on the boards in Quebec, and one more in New Brunswick.
“With LNG prices falling in recent years, the margins needed to justify this type of capital-intensive development have eroded,” the NEB’s 26-page report found. “Increased competition has also made it difficult for Canadian projects to sign long-term supply contracts.”
“The regulator’s assessment stands in stark contrast to the optimism that surrounded the industry five years ago,” the Globe observes. Energy companies’ “big dreams of exporting LNG from Canada to overseas customers” have faded as the industry struggled with a dissolving business case and largely failed “to alleviate concerns about greenhouse gas emissions, worries over hydraulic fracturing at natural gas well sites, and opposition among some Indigenous groups to pipeline routes.”
Still, “there are people actively working on both coasts who think they are going to get their projects through,” NEB chief economist Shelley Milutinovic told the Globe. “So people haven’t given up entirely.”
Those stubborn fossil optimists could draw at least a small glimmer of hope from Reuters’ report that China, “the world’s top consumer of oil and coal, has embarked on a huge investment program to expand its LNG and pipeline infrastructure.”
The news agency says China will expand its LNG receiving capacity by 8.6% per year through 2025, to a total of 150 billion cubic feet of gas annually. The country’s gas storage capacity is forecast to increase 17% percent per year, and its pipeline capacity to handle gas imports by 7.6% per year, over the same period, Reuters reports, citing China’s National Development and Reform Commission.
If the NEB is right, however, most of the gas China receives will come from the United States, Australia, and the world’s leading LNG exporter, Qatar.