Competing in the global LNG market
Evolving Canada's opportunity into reality
A generational opportunity. Multi-billions of dollars of possible capital and operating expenditures. Taxes and other levies that will fund community development, education, training and social programs. Jobs, prosperity and the potential to thrust the BC natural gas industry onto the world stage. Those are just some of the benefits credited to the BC liquefied natural gas (LNG) opportunity. Sounds attractive — but there are multiple challenges, too. Environmental considerations, project infrastructure complexities, ensuring that First Nations are included, and creating a competitive fiscal and tax regime are not easily addressed. Moreover, the competition is not next door — it’s global — and BC isn’t the only jurisdiction wanting its share.
The global LNG industry is celebrating its 50th birthday this year with growing demand and an ever‑increasing amount of new capacity proposed around the world — as much as 350 million (metric) tonnes per year (mtpa) — which, if all were built, would more than double current capacity by 2025.
Fifteen Canadian LNG export projects have been proposed and nine have already received export permits with the expectation that many more will be approved (with a view that ultimately the market and not the National Energy Board will determine which projects are viable). Proposed projects represent more than the equivalent of Canada’s current daily natural gas production of approximately 14 bcf/d.
Investment in Canada’s LNG industry will depend on whether LNG projects are competitive globally. Plentiful natural gas reserves alone will not support development. Understanding where Canada stands requires zeroing in on the factors that determine competitiveness. These include considerations such as:
Understanding the state of global competition and how other projects will impact the supply, demand and pricing balances;
Creating a framework where the various First Nations communities will support projects;
Addressing complex capital allocation decisions by global players, many of whom have multiple opportunities and are focused today on ensuring adequate project returns;
Building a fiscal policy that is fair to multiple different constituents and ensuring that such fiscal policy will remain consistent over the life of the projects;
Developing world-class competencies around people, processes and costs.
Unanswered questions revolve around many of these factors. Evolving the Canadian LNG opportunity from promise to reality requires addressing them head on.