LNG glut dims outlook for new plants

Coleman confident B.C. will be competitive despite low prices, challenges flagged in natural gas forecast

A new forecast of global natural gas demand paints a gloomier picture of the prospects for the launch of a major new LNG industry in B.C.

A new report suggests the odds are getting longer for the B.C. government’s dream of opening several liquefied natural gas export plants.

The International Energy Agency warned a flood of new LNG supply is coming onto the market and new plants will struggle to get off the ground.

“Several projects have already been scrapped or postponed, and the number of casualties will rise if prices do not recover,” said the IEA’s medium-term gas market report.

The IEA cut its LNG growth forecast from 2.3 to 2.0 per cent a year.

It noted the 17 new LNG projects already under construction will come on stream as planned and run flat out in an attempt to recover as much of their sunk costs as possible, further adding to the supply glut.

But new plants that aren’t yet approved will become harder to justify.

“Today LNG prices simply do not cover the capital costs of new plants.”

Natural Gas Development Minister Rich Coleman said he’s aware of the short-term challenges outlined in the report.

The province last month signed a long-term agreement with LNG proponent Pacific Northwest LNG assuring the $36-billion Petronas-led project of royalty and tax stability in B.C.

“Clearly some of the largest companies in the world see the value in building a LNG industry in B.C.,” Coleman said in a statement emailed by his office.

“The fact is, LNG projects have lifespans of 30-50 years. So proponents are looking at the long-term economics when deciding the viability of a project . Many analysts are forecasting that B.C. LNG will be competitive over the long-term. We share that view.”