By July 19, 2017 Read More →

Canada a ‘late entrant’ to global LNG market, says new NEB report

LNG market

LNG Market

Woodfibre LNG only Canadian project where company reached final investment decision to proceed

Canada is a late entrant to the global liquefied natural gas (LNG) market and the next several years will be critical to the development of the Canadian industry, according to a new report released by the energy information and analysis unit of the National Energy Board (NEB).

The report, entitled Canada’s Role in the Global LNG Market, looks at changing LNG market dynamics, including lower prices and fierce competition. This has created uncertainty among all LNG projects, including those proposed in Canada.

LNG is natural gas that is cooled to about -160°C in order to make it a liquid. This allows it to be loaded onto specialized tankers and exported overseas.

LNG Market

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Global LNG demand has been growing, especially in Asia and parts of Europe. Most near to medium-term increases in global LNG supply to meet this demand will come from capacity already under construction in Australia and the U.S.

Canada produces more natural gas than it needs to meet domestic demand. While the United States (U.S.) has been the traditional market for surplus Canadian gas, rapidly increasing shale gas production in the U.S. has reduced this demand and spurred interest in developing Canadian LNG exports.

Proposed Canadian LNG projects have certain advantages, including:

  • Access to abundant and relatively low-cost natural gas supplies.
  • West Coast Canadian LNG projects have a shorter shipping distance to Asians markets compared to U.S. Gulf Coast facilities while East Coast Canadian projects have a shorter shipping distance to Europe.

Since 2010, the NEB has received 43 LNG export licence applications, with 35 of them receiving approval. There are 24 planned projects – 18 based along the British Columbia (B.C.) Coast and the remaining in Quebec and the Maritimes.

Challenges facing Canadian projects include:

  • High costs to develop projects in remote locations with limited infrastructure, and where the construction of new pipelines is required to supply the necessary gas.
  • With LNG prices falling in recent years, the margins needed to justify this type of capital-intensive development have eroded.
  • Increased competition has made it difficult for Canadian projects to sign long-term supply contracts.

Woodfibre LNG near Squamish, B.C., is the only Canadian project where the company that has reached a final investment decision to proceed. Woodfibre received conditional federal approval in March 2016 and was granted a 40-year LNG export licence by the NEB on 9 June 2017.

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“In recent years, there have been a number of LNG projects proposed in Canada, and significant investments have been made into their planning and approval. Despite this, Canada has yet to emerge as an active participant in the increasingly competitive global LNG market, but proponents are still actively working on projects on both coasts,” said Shelley Milutinovic, Chief Economist, National Energy Board.

The Pacific Northwest LNG project near Prince Rupert, B.C., received conditional federal approval in Sept. 2016 and a 40-year LNG export licence from the NEB on 21 Dec. 2016, but the project still requires a final investment decision by the company. Four other projects have received major regulatory approvals.

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