Dear Santa: all I want for Christmas is my LNG

The long shot for BC’s new industry

Dear Santa,

It’s been 60-plus years since I last wrote you with a Christmas gift request so I figure I’ve banked enough to make the big ask: a green light for the LNG Canada plant. No big rush, the Fall of next year will do fine.

Thanks in anticipation,

Malcolm

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Dear Malcolm,

You don’t want much do you?

Santa

***

You’ll notice the Jolly Old Elf doesn’t actually commit to granting my wish. Is he being unreasonably pessimistic? Depends on which forecast you look at.

The big problem with LNG for the last several years has been that supply, thanks to increased production in Australia and to a lesser extent the US, far outstripped demand which drove prices down dramatically.

One school of thought contends that imbalance will change by the mid 2020s as a result of soaring Asian demand, especially from China but also from India and Pakistan.

For example, Keisuke Sadamori, director of energy markets and security with the International Energy Agency, told Reuters back in October that in the case of China year-on-year LNG import growth was already about 40 per cent.

Meanwhile India’s state-owned India Oil Corporation aims to increase its LNG imports from 2.25 million tonnes per year to 13.5 million tonnes within five years.

Then there is the bullish forecast by Cheniere Energy executive vice-president Anatol Feygin. In an LNG Industry article, he noted that Chinese LNG demand had been growing at about 2.5 million tonnes per year for the past decade, adding, “We see that growth rate increasing, possibly more than doubling over the next three to five years and probably well beyond.”

So let’s say LNG Canada gets the green light in the Fall of 2018. All things being equal that would mean the project will be in a position to ship LNG by 2023, give or take a year. Is that close enough to the mid-2020s to persuade Shell to go for it?

While I dearly hope so, there is one big fly in that rose-coloured ointment: Qatar.

The undisputed king of the LNG export trade, it has announced it is lifting its moratorium on further development in its huge North Field which would have the effect of increasing its national production by 30 per cent within the next seven years.

That’s going to go a long way to soaking up a big chunk of the anticipated increase in demand.

Then there are the Russians.

That country’s number two gas producer Novatek has just shipped its first LNG cargo from the 5.5 million tonne per year first train of its Yamal LNG plant, located in the remote Arctic. And it is on target to have the second train operational in the Fall of next year with a third firing up early in 2019.

To which country was that first cargo shipped? China, which through the China National Petroleum Corporation and the Silk Road Fund owns 29.9 per cent of Yamal.

And it is a fair bet most of the future cargos will be headed to the same destination.

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Dear Santa,

Upon further reflection, cancel my request.

Malcolm