LNG Canada boosts gas producer confidence but does little for short-term pricing

05 October, 2018, 06:31 | Author: Tara Reeves
  • Kitimat residents are looking forward to a formal announcement of a huge LNG investment this week.		
			Matt Robsinon  PNG

The United States could become the largest LNG exporter in the world by 2025 as almost a dozen new projects seek regulatory approval, King said, but he added Canada can compete because the Canadian West Coast is much closer to customers in Asia and its gas supply is cheaper.

Canadian Prime Minister Justin Trudeau dispelled speculation that tariffs on steel imports would weigh down a newly approved liquefied natural gas project headed by Royal Dutch Shell, reports Kallanish, sister publication of Kallanish Energy. It's the first major LNG project to receive a FID in several years after numerous projects worldwide were either canceled or postponed during the plunge in global oil and gas prices from 2014 to 2017.

Karen Ogen-Toews, First Nations LNG Alliance CEO called the final investment decision "great news for the B.C. economy, for Canada, and for First Nations".

The premier said during the news conference that his government will meet greenhouse gas reduction targets set by the federal government.

However, the District of Kitimat, which will be the terminus of the natural gas pipeline from northeast B.C., as well as the site of the new terminal to process and ship the product overseas, said it is "extremely pleased".

Haisla had been working with Shell and its partners for five years on agreements to mitigate LNG Canada's environmental impacts and also to establish "long-term careers instead of short term employment" for her people, Smith said.

LNG Canada will also come on-stream around the same time as a number of U.S. -based LNG projects as part of the second wave of U.S. LNG production.

LNG Canada's partners are probably betting that LNG demand will grow substantially, and even if its doesn't, they will be fine because they have first-mover advantage in what may be another wave of new projects.

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The LNG facility will be built in Kitimat, British Columbia.

Trudeau said the amount being spent is the largest single investment by the private sector in Canadian history.

Analyst Martin King of GMP FirstEnergy says the continued glut of gas in Western Canada and the march of American shale gas into its traditional markets including Eastern Canada have convinced him to roll back his forecast for a recovery in benchmark Alberta gas rates next year.

Canada may need to take a different public policy approach to bitumen compared with LNG, said James Moore, a former industry minister and now a senior adviser at law firm Dentons Canada LLP.

What the step-change in LNG did make more hard was financing new LNG projects, which typically cost billions of dollars, take at least five years to build and have long payback periods for investors.

The project had been in the works for years but faced a significant delay in 2016 amid weak LNG prices. Since the project will be built on Canada's west cost in British Columbia it can significantly reduce the time it takes to transport gas to key Asian markets compared to US based projects.

Bilous said the LNG project will mean a larger increase in tanker traffic than Trans Mountain off the coast of B.C.

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