B.C. LNG hopes come down to hard numbers

Key to development depends on very long term outlook

Last time I closed with the question, what is the outlook for LNG in these turbulent times, particularly when it comes to the proposed projects in our backyard?

Depending on what forecasts you believe, the answer is either – like Monty Pyton’s parrot – “it’s dead” or “only sleeping”.

Part of the answer lies in the basic demand-supply ratio.

The demand side does not paint a pretty picture right now.

For example, Korea Gas (Kogas) has seen its sales of natural gas fall nearly 23 per cent from December 2014 to December last year – and it has a monopoly of supply in its domestic market.

Japan’s demand for LNG fell four percent last year and China’s, after years of double digit increases, went down by two percent. Those figures are not terrifying if the supply of LNG were to hold at the level it now is.

But if you look at the 118.9 million tonnes per annum (mtpa) of new production that is forecast to come on the market over just the next two years, you could be forgiven for concluding the parrot is as dead as a doornail.

However, I question those forecasts.

The list of projects includes 62.5 mtpa from US plants. While the 18 mtpa Sabine Pass (Louisiana) project is very close to shipping product, I have my doubts that Freeport (Texas, 13.9 mtpa), Cameron (Louisiana, 12mtpa), Cove Point (Maryland, 5.2 mtpa) and Corpus Christi (Texas, 13.3 mtpa) are going to be up and running in that time frame.

(I should add that Sabine will not be shipping out the full 18 mtpa immediately but rather incrementally and even that depends on market conditions.)

You can dismiss Yamal (Russia, 16.5 mtpa) since their projected startup date is listed as 2018-2021, a clear indication they haven’t the vaguest idea when, or even if, it will proceed.

Petronas of Malaysia has a couple of floating LNG plants in the works but at a total output of 2.7 mtpa they are not market breakers.

Which leaves the total of 37 mtpa from Australia’s Gorgon (15.6 mtpa), Wheatstone (8.9 mtpa), Prelude (3.6 mtpa) and Ichthys (8.9 mtpa) proposals.

(Of interest is that Gorgon’s partners include Chevron (Kitimat LNG) and Shell (LNG Canada), Wheatstone has Chevron and Woodside (Kitimat LNG), and Shell is the big player in Prelude. Ichthys is primarily a Japanese consortium.)

Given Ichthys is in difficulties – it originally targeted late this year for first shipments but has now pushed that back to the fall of next year – let’s take them out of the equation.

That leaves 28 mtpa of Aussie production that can reasonably be expected to come to market by the end of 2018. Again, not a terrifying number since it would require only a relatively modest increase in demand over the next 36 months to maintain market balance.

All that said, what happens between now and the end of 2018 in terms of demand/supply/price is not relevant to financial investment decisions for LNG Canada or Kitimat LNG since, even if the green light for either came tomorrow morning, the absolute earliest they could be shipping LNG is 2020-2021.

So any final decision will be based on their best forecast on the cost of building their projects, demand from 2020 to 2060 – assuming a 40-year life span for the plants – and, as an extension of demand, what the average price will be over four decades.

Projected price is the big one since you have to be confident that revenues will pay all the bills and leave you with a profit.

We’ll get into the murky world of price next time.

AN ASIDE: While I applaud the recent editorial in this newspaper on council’s unequal treatment of its citizens in regards to subsidizing the cost of clearing city-created snow windrows across driveways, may I suggest there is a more basic issue.

And that is the creation of the windrows themselves.

Some 20-plus years ago when I was the Standard’s reporter covering council, this issue came up. At that time then assistant engineer John Colongard suggested a solution: attach a hydraulic “wing” extension to the graders’ blades.

The idea was that as the grader approached a driveway the wing would be pulled in so it was at 90 degrees to the blade, thus preventing the snow from being dumped into the driveway. The wing would be returned to its original position after the driveway was passed. While the system was being used successfully elsewhere, if memory serves, Colongard’s idea was torpedoed on the grounds of cost.

I suggest a re-examination of that solution, or any other that has emerged in the last two decades, would not be out of place.

msdbax@citywest.ca

 

 

 

 

 

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

This concept artwork from July 2020 shows the inland port planned for the former Skeena Cellulose mill site in Terrace. (Image courtesy Hatha Callis, Progressive Ventures Group)
Terrace city council approves inland port OCP amendments

Project still requires zoning bylaw, development permit to continue

Graph showing the 2020 passenger totals at the Northwest Regional Airport in Terrace. (Submitted/Northwest Regional Airport)
New year brings an end to a turbulent 2020 at Northwest Regional Airport

Passenger totals half of what they were in 2019

A BC Hydro outage is affecting nearly 4000 customers in Kitimat. The cause of the outage is under investigation. (Screenshot/BC Hydro Outage Map)
Power outage in Kitimat affecting close to 4,000 customers

The cause of the outage is under investigation by BC Hydro

Northern Health has issued a COVID-19 exposure notice for Uplands Elementary School. According to the notice, the exposure took place Jan. 4 to Jan. 6, 2021. (COVID-19/ CDC Image)
COVID-19 exposure notice issued for Uplands Elementary School in Terrace

Exposure took place Jan. 4 to Jan. 6 according to Northern Health letter

A woman wears a face mask and shield to curb the spread of COVID-19 while walking in North Vancouver, B.C., on Wednesday, January 6, 2020. THE CANADIAN PRESS/Darryl Dyck
536 COVID cases, 7 deaths reported as B.C. finds its first case of South African variant

Henry said 69,746 people have received their first dose of the COVID vaccine.

Martin Luther King Jr. addresses the crowd during the march on Washington, D.C., in August of 1963. Courtesy photo
Government announces creation of B.C.’s first anti-racism act on Black Shirt Day

B.C. Ministers say education “a powerful tool” in the fight for equity and equality

Jobs Minister Ravi Kahlon shared a handwritten note his son received on Jan. 13, 2021. (Ravi Kahlon/Twitter)
Proud dad moment: B.C. minister’s son, 10, receives handwritten note for act of kindness

North Delta MLA took to Twitter to share a letter his son received from a new kid at school

Black Press media file
Port McNeill driver tells police he thought the pandemic meant no breathalyzers

Suspect facing criminal charges after breathalyzer readings in excess of 3.5 times the legal limit

Forestry companies in B.C. agree to abide by the cedar protocols based on traditional laws of the First Nation members of the Nanwakolas Council. (Photo courtesy, Nanwakolas Council)
Landmark deal sees B.C. forest firms treat big cedars like a First Nation would

Western Forest Products, Interfor among companies to adapt declaration drafted by Nanwakolas Council

A northern resident killer whale shows injuries sustained by a collision with a vessel in B.C. waters. (Photo supplied by Ocean Wise Conservation Association)
Coast Guard ramps up protections for B.C. whales

First-ever Marine Mammal Desk will enhance cetacean reporting and enforcement

Two toucans sit on tree at an unidentified zoo. (Pixabay.com)
BC SPCA calls for ban on exotic animal trade after 50 parrots, toucans pass through YVR

One toucan was found dead and several others were without food

Prime Minister Justin Trudeau listens to a question during a news conference outside Rideau cottage in Ottawa, Friday, January 8, 2021. THE CANADIAN PRESS/Adrian Wyld
Trudeau says Canada’s COVID vaccine plan on track despite Pfizer cutting back deliveries

Canadian officials say country will still likely receive four million doses by the end of March

Most Read