It goes without saying that the slump in energy prices has affected a number of sub-markets in the industry over the past six months – one of those being Canada’s liquefied natural gas (LNG) industry.
Prior to the drop in prices, the LNG industry promised to be a burgeoning new opportunity for Canada’s economy, and in particular, an opportunity for British Columbia’s economy.
Natural gas happens to be one of the world’s cleanest burning fossil fuels. With a province rich in natural gas and Asian countries, like China and South Korea, hungry for new energy sources, the LNG industry was destined to be a lucrative and mutually beneficial opportunity for British Columbia and Asia. British Columbia would nurture the creation of infrastructure needed to turn gas into liquefied natural gas (which in turn would create jobs for the province), and China and other Asian countries, on the other end, would benefit from a new reliable energy source.
A win-win for everyone.
In 2013, the
western Canadian LNG export industry doubled in both number of new LNG projects and the volume of gas requested for export. In 2012, five LNG projects were proposed in British Columbia. In 2013, an additional four projects sought licenses in B.C. to export liquefied natural gas overseas.
This kind of expansion would have promised to increase jobs in the province, not to mention increase British Columbia’s tax revenues.
What a difference a year makes.
As covered in April in media outlets like the
Globe and Mail and the
Financial Post, the collapse in the energy market effectively pulled the rug out from under Canada’s and British Columbia’s growing LNG industry. This media coverage was sparked by a recent Moody’s report that provided reasons for why it would be highly unlikely that three new LNG plants scheduled for construction in British Columbia would make the proposed 2020 deadline.
The fact that the global LNG industry will be sufficiently supplied in the future by production coming from Australia and United States was provided as one macro reason hurting B.C.’s LNG opportunity.
The Moody report also mentioned the fact that British Columbia is geographically removed from the pipelines that bring natural gas to LNG plants. It was also mentioned that B.C.’s LNG industry is still so young, with many LNG projects and infrastructure needing to be built from scratch, as another inhibitor for the province.
However, nothing has been more damaging to British Columbia’s LNG prospects than the current price environment.
But, does that mean that there’s little room for liquefied natural gas development in the province? Does that mean that there’s little hope as far as the three proposed LNG plants?
Sandra Steilo, spokesperson for British Columbia’s ministry of natural gas development, remains confident and publicly supportive of continued LNG growth in the province. British Columbia’s Premier Christy Clark also continues to be a champion of the LNG industry in the province.
Others tied to the natural gas industry in British Columbia remain equally supportive.
Nathan Bauder,
President & Chief Operating Officer of a junior, local (Fort Nelson) natural gas production company, Norcan Energy Corporation, is one of those who support continued growth of the LNG industry and are hopeful that the three new LNG plants will be built by 2020.
“There is little doubt that current gas prices are dampening the energy industry across many sectors, including on the liquefied natural gas front,” Nathan Bauder comments. “But, there’s also a strong argument that
now should be the time when British Columbia builds out its LNG sector.”
Nathan Bauder continues, “The
labor to build infrastructure right now is comparatively cheap due to the price climate. But, cheap prices won’t be around for long. At some point, gas will return to the prices we saw in 2014 and over the past three or four years. So, instead of retreating from the current energy environment, [British Columbia] needs to take advantage of it.”
This week it was announced that a
$1.15 billion deal has been offered to B.C. First Nation as a way to win support for the construction of new LNG infrastructure in the province, including a new pipeline and terminal.
Does that mean that April’s media coverage about a dampening in the LNG industry in British Columbia was premature? Maybe.