13 Sep 2016

B.C. LNG proponents bullish about industry’s future

Despite delays and low prices plaguing liquefied natural gas projects proposed in British Columbia, some proponents told a Calgary audience Wednesday they remain bullish about the industry’s future.

Robert Dakers, commercial director for the Shell-backed project in Kitimat, B.C., dubbed LNG Canada, said the West Coast industry missed the first wave of LNG demand, but that it could take advantage of a new surge expected in the next decade.

“There is still a very strong prospect that B.C. LNG will happen,” Dakers said during an industry conference, citing forecasts that global demand could spike from 250 million tonnes annually to 400 million tonnes within the next 10 years.

LNG Canada, which would export up to 24 million tonnes per year, is among a few proposed B.C. projects that have received government approvals but have been placed on hold amid low prices and an oversupply of natural gas.

Pacific NorthWest LNG, backed by Malaysia’s Petronas, received approvals from Ottawa last month, raising some hope for the industry, though the partners are still reviewing the project’s future.

Twenty LNG projects have been proposed in B.C., but prices for natural gas have fallen, casting the industry into some doubt. According to analysts, only a handful of the proposals is likely viable.

“The obituary on this industry has been written a million times,” said Byng Giraud, a vice-president with the proposed Woodfibre LNG project north of Vancouver.

Giraud said his group is attempting to drive down the costs of its project so it can offer buyers a lower price and become economically feasible in a tight market.

“This project will go,” he told reporters. “We’re so capital-intensive, though. Do we have to wait for a better price?”

Rich Coleman, B.C.’s minister of Natural Gas Development, was strikingly upbeat, telling the crowd he expects three major LNG projects and perhaps three or four smaller ones will go ahead.

Coleman said he plans to meet with Petronas’ board and its partners over the weekend to get a sense of their timelines on reaching a decision on whether they will green-light the project, expected to produce up to 19.2 million tonnes of LNG.

The B.C. minister said he’s “pretty optimistic” about the industry, though he has been called an “idiot” in his home province for having such an upbeat outlook.

“I keep being told I’m wrong,” Coleman said. “I just remind them (the naysayers) of one thing, that they have to invite me to dinner the night that I get to watch them eat their words.”

Jeremy McCrea, an analyst with the investment firm Raymond James, said energy data he reviews suggests proponents are not in a rush to move their projects ahead. He said Petronas appears to be slowing down on licensing natural gas wells that would feed into its proposed LNG terminal, which “signals to me they are questioning the viability of these projects.”

“Things could always change down the road,” McCrea said in an interview. “But as it currently stands now, the dedication to working toward building projects has definitely slowed down in terms of delineation and well-licensing from these companies.”