Friday, August 23, 2013

LNG And The Blender, Pass The Salt Please

Christy Clark blathered about a $trillion dollar industry, how LNG would eliminate our debt, pay off crown corporation debt, pay for new hospitals and new schools, plus $100 billion in a separate prosperity fund for future generations, Christy Clark and the BC Liberal MLAs went even further and said LNG revenues would eliminate tolls on bridges and our provincial sales tax, ...

We were also told by Christy Clark that we were in a race with Australia....If we are in a race against Australia, East Africa, Mozambique, Russia, Qatar and so many more countries shouldn`t we at least start running..?

Because, as of Mid 2013 there is not one shovel in the ground, not one energy company has committed to build anything in British Columbia and no decisions are expected before late 2014 to 2016...How on earth can that be classified as being in a race..?

As has been reported over a year ago here at The Straight Goods, there is a glut of LNG supply coming online, more supply coming online than demand, also reported was Australia has LNG plants(multiple) coming online this year, more in 2014 ..2015..and 2016...Projects where construction started years ago..The USA has a huge advantage over B.C. s LNG proposals too..They have infrastructure and a pipeline grid for natural gas in place, America has a dozen LNG import terminals that were scrapped before completion because of a glut of domestic natural gas that can easily be converted into LNG export facilities..Thus saving $billions of dollars in construction costs..

With Japan restarting their nuclear facilities and China now fracking domestically, and of course the USA awash in natural gas one-time expectation volumes for LNG exporting and wannabe LNG exporting countries has plummeted, and so has the North American price...The price for LNG in Europe has also fallen by 30% or more, current North American Henry Hub prices are in the $3.40 range...Europe is in the $10.00 range and Asia who WAS paying in the $18.50 range...Asia(Japan) now has deals signed with Cheniere Energy for about $10.50, a Henry hub linked price...At that price nothing gets built in British Columbia..

Everything is stalled here in British Columbia, in fact floating LNG plants is the only thing being discussed for British Columbia at this time, mobile, movable, floating LNG plants...meaning very few British Columbia construction jobs, these floating facilities will be built in South Korea...They will be barged here, anchored and secured in our deep water ports and merely hooked up to a natural gas pipeline..that is if any energy company decides to invest in British Columbia...Chevron is looking for equity partners to share any and all build costs, Chevron in other words in divesting its position in British Columbia, that is what Petronas has done too...You see, despite all the blather from Christy Clark about a $trillion dollar industry, one must ask themselves, these giant energy companies who have very deep pockets, if they believed these proposed projects were so lucrative they wouldn`t be looking to surrender 40%..50%..60%...70%...of their share...Equity positions to buying customers means no profit...means no profit to the BC Government either...

Also reported almost exclusively here, Chevron...Shell...Petronas and others can`t get any long term energy buying customers at a price high enough to justify the $billions in investment to get these projects up and running, there is also the problem with locality, B.C. may be close to Japan in comparison to America`s east coast, but...But British Columbia`s gas is in the northeast part of the province, meaning there is a rugged mountain range between the gas and the coast, pipelines to transport natural gas are in the $5 billion dollar range..EACH!...America`s gas for the most part is situated close to their export facilities...Chevron...Shell...They have conceded that the earliest they will be shipping LNG out of B.C...The earliest would be 2021 to 2023..In other words, no construction would start before 2017 to 2018...In plain English, those big energy companies are laying back and waiting to see where the LNG market is going....How much of Japan`s nuclear facility is being restarted, how aggressively China delves into their own domestic fracking and gas development and especially what happens with the exciting new energy known as ocean methane hydrates...

Now you must remember, Chevron, Shell, Petronas, even though they are doing nothing in British Columbia doesn`t mean they aren`t in the LNG game, those energy giants are prominent in Australia, in Africa, in the USA, in Qatar, in Israel, the same companies have LNG plants online or under construction around the world, their position and or profitability and survival is not contingent on any British Columbia project, these are not start up companies...And the other really big LNG story is Russia and the Stan countries, Russia in particular has ramped up natural gas to China, natural gas pumped directly into China, Vlad Putin has pressured Russian energy companies to offer discounts and increase export volumes to both China and Europe..All this has made British Columbia`s LNG export dreams both gloomy and risky, risky to energy companies wanting a return on investment...And Christy Clark wanting a $trillion dollars in taxation over 20 --25 years has rattled and angered the Energy companies...There are other more compliant and yes, even more corrupt Governments in Africa and abroad willing to sellout very cheap, wink wink, envelope nod nod arrangements...One must remember, Chevron, Shell, Petrona don`t care about you, about British Columbia or Canada, they are not our friend, they care about profit and profit only and as of right now...There is more profit to be made by not building in British Columbia, by limiting supply, by creating more supply here will hurt profitability of LNG plants in other countries, all owned by the same major energy companies, and the saving of $billions by not building excess infrastructure...That is why floating LNG facilities are the only thing on the table being discussed by the major energy companies..

So..Friday afternoon, trash day, stories printed by our major newspaper dailies, stories put on the backburner and ignored by political pundits and local newscasts, nothing on the cutting edge of the ledge today on LNG, nothing reported on the news and Christy cluck cluck Clark is still vacationing in la la world, it matches her vacant la la mind...A post media story today given almost no fanfare...A story on LNG which is reporting some very uncomfortable facts, uncomfortable LNG facts reported here months if not years ago...Here is the skinny..


LNG projects in Canada given gloomy outlook by international report

CALGARY – High costs for new export terminals proposed for Canada’s West Coast make discount sales of liquefied natural gas “difficult to financially justify,” a new report says.
LNG projects proposed by San Ramon, Calif.-based Chevron Corp., ExxonMobil Corp. and others for the northwest coast of British Columbia may struggle to meet demands by overseas buyers for sales volumes linked to low North American gas prices instead of the higher-priced marker that prevails in Asia, the Norwegian-based International Gas Union said.

But high development costs, including the billions needed to fund drilling programs and string thousands of kilometres of jumbo pipe across a rugged wilderness, could make it harder for Canadian projects to offer LNG prices that are competitive with their U.S. counterparts, the IGU said.
“Project costs in Canada far exceed counterpart projects in the United States where the natural gas market is much more liquid,” said the organization, whose 110 members represent 95% of the world’s gas market.
“Moreover, the distance between the proposed export facilities and the North American gas pipeline grid is large, and connections are small in both capacity and number.”

The call for LNG sales volumes linked to U.S. gas prices has led to a standoff between some project developers and Asian customers, as Canadian proposals vie with U.S. competitors for market share in the Far East.

Chevron, the second-biggest U.S. energy company, has balked at demands for discount sales from its five-million-tonne-per-year Kitimat, B.C. LNG proposal, arguing higher prices are needed to justify the enormous capital expenditures involved in building export infrastructure.

The disagreement has prompted delays reaching a final investment decision, as the company seeks buyers willing to sign long-term contracts based on the price of oil.

“Exporting Henry Hub-linked LNG is risky” because the U.S. benchmark price is volatile, the IGU said. “This is a problem because Western Canada shale gas will likely be more expensive than the marginal acreage that sets Henry Hub prices,” the report said.

U.S. projects, by comparison, are expected to be more flexible because many are designed to take advantage of existing infrastructure, and are therefore cheaper to commission, the IGU said.

Chevron has said it would offer prospective buyers equity positions in its proposed export plant, mirroring moves by Royal Dutch Shell, Malaysia’s Petronas and the U.K.’s BG Group to sell off interests in the massive developments to potential customers

Read more:


Now for those interested in everything LNG, there is a new section on The Straight Goods home page righthand sidebar...It`s called Straight Goods LNG Files...There are some of the posts we have done on LNG, it is all there, peruse at will and don`t forget to share...

And I would like to add something else...Christy Clark blathered on and on how British Columbia was the (IT place) energy companies were focused on...Nope, we are but a tiny blip in a crowded and now saturated LNG market...Here are a few LNG related issues to think about..

Have a look at all the players, all the countries involved in exporting LNG, and this is only a partial list...Click the below link..

And you really should have a look at what Russia has going on...World natural gas domination, and with conventional gas..

Happy Summer, have one for me would ya....

The Straight Goods

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Elwood said...

Another excellent article Grant! You should be the leader on lng of BC's sickly MSM who are just too lazy! Y

Grant G said...

Thanks Elwood...

And thank you for the loyalty..

All these readers, from all over, yet almost everyone avoids comment, a good sign, I think.


Anonymous said...

Mr. Straight goods, not sure what to think of the style of writing you employ, critical, comedic and unique, from piker to pro.

Do not always agree, but always entertaining.


Anonymous said...

Will continue to be talk until the next election. Just prior, someone will put a shovel in the ground. Then it'll stay like that until next election. Politics. Good for nothing. LNG won't happen. Keep watching the pipelines though.

dan said...

I didn't pay to read this article from May of this year, but here is the link;

Hugh said...

40% increase in demand for BC Hydro? Been hearing that for 12 years, didn't happen.

Wait till rates go way up, demand will probably drop in BC.