[Flash Walken]

The economics of this project have been suspect since it's inception. This is a casualty of technology, not some hamfisted attempt to bring out the environmental boogeymen. The economics of this project were always uncertain.

From 2014:

At least 17 projects to produce and ship Liquefied Natural Gas (LNG) from British Columbia are in various, early stages of development, but in no case has a final investment decision been made. All of them involve bringing gas to overseas markets, mostly in Asia. The Liberals who run the province say a healthy LNG sector is at the centre of their plan to restore its fiscal health. They hope that LNG will bring it between C$130 billion ($116 billion) and C$260 billion ($232 billion) in new revenue over the next 30 years.

All that, so the theory goes, should help make up for the fact that the province's other big energy export, coal, is in crisis because of falling world prices. Four coal mines have been idled recently because they are no longer viable. The latest was the Trend facility in northeastern BC, owned by Anglo-American, which last year produced 1.5m tonnes of coking coal. The price of that product has tumbled to US $120 per tonne, down from an historic high of $300, reached in 2011. Back then, a Canadian coal company, Grande Cache, was bought by Asian interests for C$1 billion; last week, a controlling share was sold for just C$2.

That grim background makes the idea of an LNG bonanza more attractive, but not necessarily easier. Relations with one of the main potential investors in LNG, Petronas of Malaysia, have become very tense as each side accuses the other of unrealistic expectations. On October 6th, the chief executive of Petronas, Shamsul Azhar Abbas, said plans to build a new C$11 billion facility in BC might be delayed by 15 years unless the provincial government offered better terms.

One of the Malaysians' complaints is beyond the remit of the provincial government: the high cost of Canadian labour and the difficulty, under Canadian federal law, of importing temporary foreign workers whose pay would be lower. Christy Clark, the BC premier, has said the Conservatives who dominate Canadia's federal government are "tragically misdirected" in their refusal to show greater flexibility on this point.

https://www.economist.com/blogs/amer...bia-and-energy

2016:

“B.C. LNG faces multiple issues, so to focus on the current market situation is a little myopic,” the Houston-based senior director of the Center for Energy Studies, told Metro. “For B.C. LNG, you’re last in the pecking order there.”

Even if oil and gas prices recover from their current collapse, “headwinds” include competing with Russian gas pipelines, the growth of renewable energy in China, and massive U.S. production.

It’s the “upfront capital expense” that puts B.C. in an unattractive light for investors, he argued, not just current prices. Only one scenario would see B.C. build one single project, he argued — if global demand suddenly accelerated “dramatically.”

“Then I could imagine a situation where one B.C. LNG project might look viable,” he said. “But if the demand is gradual — and you can anticipate that — there are lots of other projects much more attractive than something in B.C.”

Medlock also questioned Clark’s statement to Metro that, “We’ve seen $20 billion spent so far, so there's been a lot of work that's happened in terms of all the survey work, all the land-clearing work — $20 billion is a lot.”

“Wow, that seems too big,” he reacted, “way too high. It’s hardly a $20-billion price tag to construct an entire terminal.”

http://www.metronews.ca/news/vancouv...economist.html

2014:

Days before the deadline for its final investment decision, the company said it was deferring the 12-million tonnes/year project despite having secured agreements with the B.C. government.

Barry Munro, Ernst & Young’s Calgary-based oil and gas leader, said that while Petronas and the B.C. government showed great commitment to develop the PNW LNG project, the economics decisively shifted in the U.S.’s favour this year.

“The U.S. factor emerged strongly in 2014,” Mr. Munro said. “We have a very competitive neighbour, which has raised the odds against the development of a major Canadian-LNG export industry.”

Nevertheless, in an interview with the Financial Post last week, B.C. Premier Christy Clark maintained that Petronas will make a decision on the project next year. Confirming her comment, Sharbini Suhaili, Petronas’s international upstream vice-president, told reporters in Kuala Lumpur that he expects the company to make its decision in the first quarter of 2015.

Petronas postpones investment decision on Pacific Northwest LNG project
But it won’t be a straightforward one as Petronas is under pressure to increase investments back home largely to placate powerful politicians and counter Malaysia’s slowing economy. As a result of reduced earnings from lower oil prices, the company’s expected reduced contributions to the economy next year could spark criticism following its recent costly forays into Canada, Brazil and Venezuela.

At Petronas’s third quarter results briefing last month, CEO and President Shamsul Azhar Abbas warned of a 15% to 20% cutback in next year’s capital expenditure, and a 37% reduction in oil-based payments to the government if Brent crude averaged US$75 a barrel. Brent is now trading below US$65.

While the company was unhappy with what it saw as a delay by the B.C. government in announcing its final LNG tax rules, it also gave itself the herculean task of completing the massive greenfield project from conception in 2013 to plant start-up within five years.

Lacking experience with North America’s regulatory, aboriginal, labour and environmental challenges, the company plunged into Canada’s shale sector by proposing to bet the equivalent of 10% to 12% of Malaysia’s GDP on a single project.

“I’ve been asking the Malaysian government and Petronas to justify how they could invest so much of the country’s resources in a single project in an unfamiliar part of the world,” said Rafizi Ramli, a former Petronas chartered accountant and engineer who is today the secretary-general of the PKR, a leading opposition party. “I have yet to receive an answer.”

Mr. Rafizi, 37, who once handled tax and accounting matters for the international operations of Petronas’s Carigali upstream subsidiary until he resigned in 2009, said he plans to step up a national campaign for greater transparency and accountability in the management of one of Asia’s most successful state-owned energy firms.

While he expects Petronas to remain in Canada, he does not rule out the possibility of the company scrapping the LNG plan if market conditions fail to improve.

http://business.financialpost.com/co...2-1b1b9161951a

2014:

B.C. could also face intense competition from LNG export plants that could be developed in the U.S. along the Gulf of Mexico and in Oregon.

The CCPA’s Lee said that large companies such as Shell and Chevron want to cover their bases by staking claims in several jurisdictions.

“If you’re doing that in B.C. and Oregon and Australia and maybe somewhere else, then you’re able to play governments off against each other in terms of getting the most competitive deal,” he said. “So I think it’s smart for companies to be doing this.”

Lee and Austin agree that the key will be the price of LNG in Asia.

That’s also a topic of keen interest to Hillard Huntington of the Energy Modeling Forum at Stanford University.

His group brings people and organizations together to try to standardize assumptions about where energy prices are going.

The participants include energy companies, the U.S. government, Environment Canada, various utilities, academic groups, and industry associations.

Huntington told the Straight by phone from Stanford that U.S. federal officials are “particularly interested” in this research as they’re trying to decide how many LNG-export licences should be awarded.

“I’ve tried to get people involved from the B.C. government, but…it’s been a little hard to get their interest,” Huntington said.

He expects that the differential between LNG prices in Asia and North American natural-gas prices will “probably narrow a little more than people think is going to happen”.

“One of the reasons, of course, is as British Columbia and places in the United States start exporting more, that’s going to push up the price of gas here,” he predicted. “It’s not going to be dramatic. It’s not going to double the price or anything like that, but it’s going to push up the prices here as you’re selling overseas.”

That’s aside from the possibility that arbitrage (simultaneous buying and selling of commodities) in global natural-gas markets could offset the price differential.

Huntington also said that one of the biggest uncertainties is China.

According to a 2012 report by the U.S.–based Center for Strategic and International Studies, China has more “technically recoverable shale resources” of natural gas than the U.S. and Canada combined.

“You’re probably talking a decade or so before it really starts taking off,” Huntington said. “What that means is there’s kind of this window where some people will make money exporting these supplies. But I think it will be a limited window, and eventually market forces will kind of close that gap.”

That’s to say nothing of intense competition posed by gas-producing giants such as Qatar and Russia.

The Panama Canal expansion project has the potential to facilitate Gulf-state LNG exports to Asia, creating more challenges for B.C. plants.

2015:

The ship has already sailed in the global race to export liquefied natural gas to Asia, according to U.S. energy economist Kenneth Medlock — and Canada has missed it.

Medlock was a keynote speaker at the Canadian Energy Research Institute's annual conference on natural gas. This year the conference was called LNG: Canada's Last Window of Opportunity.

That title reflects the simmering anxiety among natural gas producers in Western Canada that the opportunity to sell their natural gas to Asia is slipping away

The anxiety is well-founded, according to Medlock.

"We don't see any LNG exports from Canada until almost 2040," he said in an interview.

Medlock expects almost all new LNG supply to come from the United States or Australia.

The largest issue is cost. Canadian projects are greenfield, meaning they are being built from scratch.

In the U.S., multiple projects are conversions of existing LNG import terminals that already have ports built and pipelines attached. They simply need to be converted so they can export instead of import.

"The fixed cost to get them finished is relatively low," said Medlock. "That serves a distinct advantage."

Medlock expects four of those terminals, including Maryland's Diamond Cove, pictured above, to come online soon, as well as several Australian projects.

"That’s going to cause a lot of softness in the market and cause a lot of developers to put the brakes on things.

"That's the capacity that’s coming — it’s already steel on the ground, so it’s happening — and the market is just not going to be substantial enough to absorb it all in a very short period of time. It's a classic boom-bust cycle."

Once that capacity comes online, Medlock expects, Asian LNG prices will drop to the point where Canadian facilities are no longer viable.

Because international prices for LNG are linked to the price of oil, they have come down considerably since August. The Japanese benchmark was trading close to $15 US per million British thermal units (MBTUs) to under $7 US. That's not enough to make shipping LNG from North America profitable for anyone right now.

http://www.cbc.ca/news/business/lng-...says-1.2978953