(EnergyAsia, October 30 2013, Wednesday) — A think-tank has advised Canada to temper its excitement over prospects that the nascent liquefied natural gas (LNG) industry in British Columbia (BC) could generate C$1 trillion in revenue, create more than 100,000 new jobs and deliver the province to debt-free nirvana by 2046.
In describing BC as “coming late to the party”, Calgary-based Canada West Foundation said China, Asia’s most important gas market, has already established pipeline import deals with Russia, Central Asia and Myanmar that will increase by 37 billion cubic metres (bcm) per year based on projects currently under construction, and by an additional 68 bcm/year (105 bcm/year total growth) if all the reported projects proceed.
In contrast, the foundation noted in its report, “Managing Expectations: Assessing the Potential of BC’s LNG Industry,” that the most advanced of the 10 projects in BC are only at the early front-end engineering and design (FEED stages, with start-up at least four to five years away as none has yet firmed up their final investment decision. Several international consortia, including those led by Chevron Corp, Royal Dutch Shell and Malaysia’s Petronas, are proposing to build a total of more than 124 billion cubic metres or around 90 million tonnes per yearof LNG capacity along the BC coast.
Meanwhile, traditional LNG suppliers to Asia like Qatar, Australia and Malaysia, among others, currently have 96.9 bcm/year of capacity under construction. Another 90.1 bcm/year of capacity have passed the FEED stage, and could be followed by another 81.9 bcm/year of capacity that has been announced.
“If all of this proceeds, it adds up to 268.9 bcm/year – 52.9 bcm/year more than anticipated market growth in Asia,” said the report. This total planned and proposed capacity would more than meet the region’s projected natural gas demand increase of 216 bcm/year between 2013 and 2025.
Furthermore, the foundation said China has lined up lower cost alternatives, and that LNG suppliers should be prepared for downward pressure on prices and revenues as the global competition to supply Asia heats up.
“World LNG demand has grown at more than 7.5% per year in the past decade and is predicted to surpass 400 million tonnes per annum by 2021,” said Len Coad, the foundation’s director of the Centre for Natural Resources Policy.
“While this appears to be a sure thing for British Columbia, success hinges on multiple factors – including timing, pricing, cost and shale gas resources in China. By 2025, there may be more gas available to Asian buyers than they will need. This means that BC will face strong competition.”
The report recommends the provincial government and the industry to “move quickly to out-maneuver competitors, including LNG from established suppliers, pipeline imports from Russia, and shale gas development in China”.
They should prepare “for a more modest natural gas boom in the event that projected production and revenues build more slowly, and pay attention to risks associated with supply and transportation costs while continuing to focus on other opportunities for natural resource development.”