Thursday, February 21, 2013

British Columbia`s Natural Gas Prosperity Dream, Smells Like Rotten Eggs

The chart above is a 1 month price profile for the price of natural gas..

The next graphs on natural gas pricing will be as follows..






As you can see, 6 month pricing chart for Natural Gas has shown flat prices...

The above graph is a 1 year graph.. Pay close attention to the price of natural gas, and remember, the BC Liberal Government are claiming that they will, in the Asian gas markets get a price for natural gas/LNG at more than 5 times the highest price point($3.75) in the above graph, Pat Bell is touting and using $dollar numbers in the $15 to $18 dollar per unit range for decades to come to sell his pathetic prosperity fund, the North America price for natural gas is currently(Today, February 14th/2013), just over $3 dollars).

 As you can see in the above 3 year graph, in March of 2010 the price of natural gas was in the $6.50 per unit range, what`s happened over that time? fracking, shale gas, new technology for extracting trapped gases in the earth are now being deployed widely, the secret(s) of extracting shale gas are out in the mainstream, worldwide, Natural Gas deposits are everywhere, China itself has a 300 year domestic supply, Russia is awash in natural gas in Siberia, a new pipeline from Kazakhstan directly into eastern China has just been completed, this gas line is advertised to supply natural gas to 600 million Chinese people alone, one pipeline with several spur lines, that is almost half of China`s population, the natural gas supplier for those pipelines will be Kazakhstan and Russia, Canadian gas will never flow through that pipeline(s) system and spur lines......Why is that point important, it`s important because 50% of the Chinese market for our gas is already gone, it`s important because now we are racing Australia,....Australia, a country with a 5 year head start with processors, freezers and trains, the facilities needed for producing/freezing  LNG, we are racing Australia who has a 5 year head start and half the Chinese market is already gone...
" The longest section of the Turkmenistan-Uzbekistan-Kazakhstan-China transit pipeline passes through Kazakhstan’s territory: it measures 1,115 kilometers in length, of the total 1,830-kilometer Turkmenistan-China distance. Kazakhstan is adding a dedicated export pipeline for its own gas exports to China. In combination, these developments (alongside planned oil exports) confer to Kazakhstan a major role in China’s energy security calculations.

Kazakhstan is currently transiting Turkmenistani gas to China at an annual rate that should approach 30 billion cubic meters (bcm) by December 2012 (i.e., set for the full calendar year 2013), plus small volumes of Uzbekistan’s gas in transit. The transit pipeline is planned to reach full operating capacity through the parallel Lines A, B and C at 65 bcm per year by December 2015 (presumably from the calendar year 2016 onward)"[tt_news]=39758&tx_ttnews[backPid]=7&cHash=fd2b03dc794353c0fd214a4c74190948


Australia has spent $billions in natural gas and LNG infrastructure, they are years ahead of BC.

Russia is the world`s largest natural gas producer, and supplier, our American neighbors are going Fracking crazy, they too are swimming in natural gas, there are huge natural gas plays in Qatar, in Africa, let me repeat that, there are huge natural gas plays in countries where wages are a fraction of the Canadian wage, there are natural Gas plays everywhere, so it seems, yet our BC Government, Christy Clark would tell you that despite the cheap current American price, despite the world glut of natural gas, despite the fact that many countries are ramping up production, despite China having a huge domestic reserve of natural gas, despite of all that China will buy LNG for record prices for decades, there is no risk, those Chinese have so much money that they won`t mind paying 5 times the North American price, and all those other countries that are years ahead of us in LNG export facilities, all those countries will keep their price at 5 times the North American price for their Chinese customers, even though there is a glut, even though some country`s natural gas won`t be bought because of glut and over-supply, Christy Clark and Pat Bell would tell you that no one country would undercut the other and lower the price, and the Chinese won`t push for lower prices, those Asian natural gas buyers won`t want the lowest price in the world, no indeed, China the world`s soon-to-be largest consumer of natural gas and our Government would tell they can predict price, profit and royalties levels in this volatile market for decades ahead..Now that`s funny and unrealistic, it`s also not a sound business plan..

Can you see that in the above 5 year graph, back in 2008 the price briefly surpassed $10:00 per unit, it was also at this time when the BC Liberals last had surplus budgets, there was no good economic managing, it was resource revenue, the NDP had to deal with falling commodity prices and the Asian Flu in the 90`s, ..commodity prices between 2004-2008 were high, that is the only reason the BC Liberals ever ran surpluses...The point I am making is this, we have no control over commodity prices.

I guarantee you that China will receive very favourable natural gas pricing, countries will undercut each other for market share, one only needs to look at the movie business, not just countries but even individual provinces and states within the same national unified country are undercutting each other, corporations pitting state and province against each other, the race to the bottom, a race controlled by corporate lobbyists and systemic corruption..

yet Christy Clark would have you believe that natural gas will never go that route, never drop in price overseas, the BC Government who have undercut other provinces and countries with tax/subsidy incentives many times themselves, all in the name of poaching business,  and is not the Chinese Government the most corrupt business country in the world, kick-backs and bribery are common, not to mention very sharp pencils...

10,000 Corrupt Chinese Officials Took 120 Billion Dollars Out Of The Country

 By Chris Oliver
 Corrupt Chinese officials and employees of state-owned companies have absconded with about 800 billion yuan ($123.7 billion) of public money over 15 years through 2008, much of it making its way to the U.S., Canada, Australia and the Netherlands, according to Chinese news reports citing a central bank study.
The 67-page report, completed in 2008, was posted on the People’s Bank of China’s website this week, purportedly by mistake, and has since been taken down, although PDFs of the document are circulating in cyberspace.

In the report, which appears never to have been intended for public release, the PBOC estimated about 16,000 to 18,000 individuals have fled the country with ill-gotten funds over a 15-year period leading up to the report’s release, according to news-media accounts.

The PBOC focused upon where people went and how they got the embezzled funds out of the country.

One method, the study was cited as saying, was with the help of family or other trusted individuals who emigrated overseas, often using fake documents.

China will not pay 5 times the North American rate, China will not sign decade`s long energy buying contracts at lucrative prices, China will precipitate a natural gas bidding war and anyone who thinks different is either delusional or has drank too much corporate koolaid,

10-year Natural Gas available at the below link.

There it is/was,  the peak high for natural gas was early 2007 /2008, it`s been a downhill slide ever since, I would also like to remind you that currently every country is broke, America, Canada, Europe, individual states and provinces and even Germany, everyone running deficits, even Alberta is running its 5th straight big deficit, interest rates at record lows for both banks and country..

The public, the consumer in both the USA and Canada have never been deeper in debt, consumer debt, credit cards, car debt, mortgage debt isn`t even included in that tally, wages are flat worldwide and every time we turn around another level of Government is digging deep in our pockets, property taxes, user fees, transit increases, insurance cost increases, it doesn`t end..

We have gasoline at the pump at near record prices, in a stagnant economy with flat wages there is not much room for higher fuel prices, and, there is hardly room in this weak economy to have domestic natural gas prices sky-rocket to new historic highs, 5 times the current price..

Because unless the North American price goes to $15 to $18 dollars, unless that happens China will never pay that price on a long-term basis with a world glut, with its own huge domestic supply, with many countries all fighting for a share of the same Asian market...

A recipe for disaster forecasting decades into the future, a recipe for financial collapse putting all our eggs into one fragile LNG basket of eggs..

This post isn`t about pessimism against industry or business, this post is about reality, to count on $trillions in revenue from a industry not yet up and running, no long-term contracts, a world glut, attempting to forecast decades in the future is not only stupid and fantasy, it`s not a business plan, it`s a lottery ticket for a gambling game not yet in play..

Maybe as a province we can make money on LNG, done right on the right scale, but what is being boasted and fantasized about will collapse. 

Just look to the movie industry, tax credits, subsidies,  countries racing to the bottom, look at what corporations are doing, Air Canada and the Aveos betrayal, Caterpillar leaving Canada for cheaper labour, industry moving to the lowest tax jurisdictions, are we to believe the natural gas industry is any different, and if you were a country with a glut of natural gas but no customers what would you do?

Advanced charts below..

The Straight Goods

Cheers Eyes Wide Open


Anonymous said...

These "free enterprise" Libs just don't understand free enterprise. Perhaps they should look up the word "glut".
Another race to the bottom.

Anonymous said...

Unable to view images. Clicking on the link gets this message:

Retrieve() returned no data
Liberal gremlins?

Grant G said...

Sorry about the charts, you can view then here at this link..

Click advanced charts, 3 month..6 month..1 year..3 year and 10 year charts on Natural gas are there..


Anonymous said...

I was sure I read at one time. China has their own massive gas fields.

China has poisoned their farmland with heavy metals and cancer causing agents. The are also running out of clean drinking water.

Would this be why, China won't frack for gas in their own country? Just thought it strange Christy sold our n.g. to China, when they have an abundance?

Grant G said...

Yes, China has gobs of natural gas..

This viral story laid it out..

As for China isn`t developing their own gas(yet)..Why bother when you have a bunch of countries running around like chickens with heads cut-off, all willing to go low, and stay low..!

There are water issues in China, but as I repoted, China is looking at desalination plants to turn salt water into fresh water, all for fracking..

And a massive Natural gas line has just been completed running from Kazakhstan to central China, that one pipeline alone will supply 600 million Chinese with Natural Gas..

China Tigers will continue to play with Canadian Sheep..

Baa Baa..

Cheers Eyes Wide Open

Hugh said...

It's good to know that we will be able to import gas from China once we give all of ours away.

Especially on those winter nights when it drops to -30.

e.a.f. said...

I would suggest c.c. and crew put forth this fantasy budget because they couldn't face the reality of the deficeit. The lieberal "free" enterprisers don't know how to manage a business, a provincial economy, or a screw in a whore house.

The lieberals, by presenting this budget, avoided dealing with the reality of life in B.C. and the lack of income for the provincial coffers.

Ms. pie in the sky, wait 30 yrs hasn't figured out how to take care of the bills at the end of this month. The minister of education is asking school boards to find money in their own budgets to fund the increase in salaries for staff. If the province doesn't have the money for this, then they have a problem because school boards have gone so long without adequate funds, they don't have any spare change. Short of selling the schools to developers, its the end of the line. Lieberals don't want to deal with this reality. They have put Hydro so far into debt they can't use it to find extra cash, so they just spin gaseous dreams.

any body who can read a business newspaper knows the budget is just "gas", a bunch of gas bags talking about some delusional dreams.

Anonymous said...

Another great article, you get better and better. I don`t know if there will be an ongoing glut and don`t know if it even matters that much because just as you said, Albertans are getting screwed out of their resources for a few jobs and lots of debts, so it will be in British Columbia. Because we don`t have democracy here, we have corporatocracy; it is written right into our election laws in the poolitical contribution section which plainly states that *anyone* whether local or international can buy the government of BC. Which legislation spawned a graft of grifters onto the face of BC from which we shall be lucky to ever recover.
Keep swinging though Grant, you are a wonderful tonic to the usual BS masquerading as news in this province.