LNG Canada boosts gas producer confidence but does little for short-term pricing

Cesar Mills
October 5, 2018

Opposition Liberal Leader Andrew Wilkinson, former Liberal energy minister Rich Coleman and Skeena Liberal MLA Ellis Ross, a former Haisla Nation chief and early LNG backer in Kitimat, were present at the signing ceremony with Horgan, Prime Minister Justin Trudeau and representatives from the five global energy giants behind the LNG Canada project.

"Trade barriers won't be an impediment to moving forward on this project", Trudeau told a news conference in Vancouver Tuesday following the announcement that Shell and its four partners were moving ahead with LNG Canada, the country's largest private sector investment ever.

Russia's Novotek also appears close to taking a final investment decision on its nearly 20-million-tonne-a-year Arctic 2 project, and there are also two ventures in east Africa that may be approved in the not too distant future.

"It's excellent news that we can get an announcement of a major project in Canada", he said.

"The impact on the immediate market probably isn't great, in terms of an immediate recovery of pricing, but if we can get this and others built behind it, it's great for the long-term future of the Canadian business".

LNG Canada was given final approval late Monday night to move to construction by a consortium of oil and gas companies headed by Royal Dutch Shell.

The project will also receive $215 million in federal funds for infrastructure and environmental performance measures, making it the single largest government investment in the Canadian private sector.

The other companies in the Kitimat joint venture comprise Petronas, PetroChina, Mitsubishi Corporation, and Korea Gas Corporation.

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At an investor breakfast Tuesday, he said natural gas prices will average $1.57 per thousand cubic feet in 2019, just two cents higher than this year so far, and marked down from an earlier prediction of $3 per Mcf. "We came in and we saw we needed to have a new framework".

"It validates the reality that in B.C. projects can be done if it is done in the right way when it comes to resource development through a process of building relationship before we build the project", he said.

"Gas in Western Canada should be quite competitive", said Feer. "It certainly gives producers something to hang their hats on".

But Andy Calitz said the LNG plant that's planned for Kitimat on B.C.'s coast and a 670-kilometre pipeline delivering natural gas from the northeast corner of the province shows the way forward. 'Supplying natural gas over the coming decades will be critical as the world transitions to a lower carbon energy system'.

"For Canada, I think it's a big deal", said Feer, pointing out that Canada's gas export options are now limited to its southern neighbor - where domestic gas production has risen dramatically.

What the approval of LNG Canada shows is that the market dynamics surrounding LNG have changed dramatically since Australia, and to a lesser extent the United States, embarked on the last round of mega-projects.

"Beyond this, we believe this project has the potential to be the first of many on the West Coast of Canada", if Canadian LNG follows the global standard, being that LNG export areas tend to be "hubs" of terminals, rather than standalone facilities", they wrote.

Other reports by GizPress

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