Canada a ‘late entrant’ to global liquefied natural gas market, says new NEB report

CALGARY, July 18, 2017 /CNW/ – 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 LNG industry, according to a new report released by the energy information and analysis unit of the National Energy Board (NEB).

The report, titled 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 -160C in order to make it a liquid. This allows it to be loaded onto specialized tankers and exported overseas.

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.

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.

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

Quick facts:

• An NEB-issued export licence is required for any company seeking to export natural gas from Canada. When reviewing an application, the Board considers whether or not the amount of natural gas proposed to be exported is surplus to Canadian demand (section 118 of the NEB Act).
• Canada’s total natural gas usage in 2015 was 3.1 Tcf, with nearly 1,100 trillion cubic feet of total remaining natural gas resource. That is enough for about 350 years of Canadian supply, based on current consumption rates. Almost three quarters of that supply is in tight and shale gas formations in Alberta and B.C.
• Along with the export licence, new LNG facilities in Canada require additional authorizations from other regulatory bodies. Typically, both provincial and federal environmental assessments are required and depending on the nature and location of the project, additional regulations may apply.
• 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.
• 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.

Quote:

“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.”

–       Shelley Milutinovic, Chief Economist, National Energy Board.

Associated links:
Canada’s Role in the Global LNG Market
Feature Article: Canada’s market and regulatory structures have kept Canadians well supplied with natural gas

The National Energy Board is an independent federal regulator of several parts of Canada’s energy industry. It regulates pipelines, energy development and trade in the public interest with safety as its primary concern. For more information on the NEB and its mandate, please visit www.neb-one.gc.ca

SOURCE National Energy Board