Canadian gas export projects seen overcoming energy price slump

By REBECCA PENTY
Bloomberg

Proponents of natural gas-export terminals along Canada’s Pacific Coast will decide before year-end on the construction of at least one facility as they look past an energy price collapse, a group representing the projects said.

Terminals to ship liquefied natural gas (LNG) from British Columbia are poised to take advantage of a global supply deficit of 120 million tpy by 2025, David Keane, president of the BC LNG Alliance that represents proponents including Chevron and Malaysia’s Petronas, said this week at a conference in Calgary.

“LNG in B.C. is not an if but a when,” Keane said. “That supply gap is going to be filled by someone and I think we’re in a good position as a province and as an industry in Canada to capture some of that market.”

Crude’s plunge by more than half since June has taken down LNG prices, crimped the ability of energy companies to finance megaprojects and led to delays by companies including Petronas and BG Group in deciding whether to invest in Canadian projects. None of the backers of 19 LNG proposals in British Columbia have yet decided whether to build.

Proponents are “concerned but not alarmed,” by the oil price slide as they focus on long-term demand from growing Asian economies, Keane said. There is a short-term potential for LNG supply to outstrip demand, he said.

The Canadian industry benefits from lower air temperatures that mean plants will require less energy to cool the gas into a liquid for shipment by tanker, Keane said. The added efficiency of Canadian facilities will lead to a 25% higher production capacity for the terminals than for similar plants along the US Gulf Coast, he said.

Tax Incentive

The biggest barriers that delayed the Canadian industry in recent years have been resolved after the British Columbia government overhauled its LNG tax regime in October and the federal government last month said it would offer tax breaks to the industry, Keane said.

Energy companies are now in talks with aboriginal groups about benefits agreements and the British Columbia government regarding how the province’s greenhouse-gas emissions policy will be implemented, as well as regarding worker training programs, Keane said.

The alliance estimates that a large LNG project will require between 4,000 and 7,500 workers to build the terminal and 3,000 to 4,000 to build a pipeline from inland gas fields.

Each project is expected to pay about C$1 billion ($803 million) a year in taxes to various levels of government, Keane said.

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