Nuclear energy revival clouds LNG prospects

What happens to B.C.'s LNG dreams if Asia embraces nuclear energy?

In a previous column I closed out with mention of the elephant in the room where the certainty for a northwest liquefied natural gas (LNG) industry is concerned.

To explain, on February 9 residents of Tokyo went to the polls to elect their governor.

The favourite going into the campaign was former national health minister Yoichi Masuzoe who had the support of the ruling national coalition.

Two of his opponents were lawyer Kenji Utsunomiya and former prime minister Morihiro Hosokawa both of whom were adamantly opposed to nuclear energy.

Hosokawa in particular tried to turn the election into a referendum on restarting Japan’s nuclear power plants which had been shut down in the wake of the Fukushima disaster of March 2011.

While that may have seemed like a good strategy given opinion polls last year showed between 50 and 60 per cent of respondents opposed to the return of nuclear power, it failed spectacularly – Masuzoe won in a landslide receiving more votes than the other two combined.

So what went wrong? It turned out that whatever misgivings the voters might have had regarding nukes, their main concern was the economy which has taken a hammering from the cost of importing high priced liquefied natural gas to replace electricity formerly generated by the nuclear plants.

Japan’s prime minister Shinzo Abe will doubtless see this result as a vindication of his plans to reactivate the nation’s nuclear plants, provided of course they can achieve the stringent safety measures now required for any such restarts.

If Japan fires up all 48 of its nukes, its need for LNG will  fall by about 50 million tonnes per year – that’s equivalent to the output of five plants the size of the proposed two-train Kitimat LNG project.

Meanwhile China is another country taking the nuclear route.

That country actually has 17 reactors in operation at the moment but Sun Qin, chairman of China National Nuclear Corp, told Reuters last month that it may build 20 or more nuclear reactors over the next six years with six of those expected to get the government green light by the end of next year.

If all goes according to plan, China will triple its nuclear capacity by 2020 and triple it again over the following 10 years.

What impact that will have on China’s demand for LNG and what price it is prepared to pay for it is unclear since nuclear power is largely seen as a way to replace coal-burning power plants, one of the main causes of its appalling air pollution.

Then there is FLNG – as in floating LNG plants.

With project costs for land-based plants going sky high in Australia, Shell opted instead to use FLNG to develop its Prelude property, located 125 miles off the coast.

While Shell is coy about the cost of its FLNG platform, analysts estimate the behemoth – the size of an aircraft carrier – will run the company about $12 billion, less than a quarter of the cost of Chevron’s on-shore Gorgon plant.

But Prelude will only produce 3.6 million tonnes of LNG per annum versus Gorgon’s 15.6 million tonnes. While on its face the cost per tonne seems to favour Gorgon, the expectation is that the operating costs of an FLNG plant will be cheaper than those on land. Prelude will be the first FLNG project ever so Shell is heading into unchartered waters, so to speak.

You will doubtless have noticed there are quite a few “ifs” in the preceding paragraphs.

But those are the kinds of scenarios that proponents of the various north coast LNG plants have to wrestle with when it comes to a decision on whether to spend billions of dollars on their projects.

In the end, it looks like the only certainty in LNG at this moment is uncertainty.

Retired Kitimat Northern Sentinel editor Malcolm Baxter now lives in Terrace, B.C.