AltaGas shelves B.C. LNG plant
• Collapsing energy prices and a growing global surplus of a liquefied natural gas have dealt another blow to British Columbia’s plans to develop an LNG industry.
AltaGas Ltd. said Thursday it is shelving its Douglas Channel LNG plant, widely considered one of the B. C. frontrunners, saying it was unable to find customers for the super-cooled natural gas.
“The Douglas Channel consortium has been unable to secure meaningful off- take agreements for the project,” AltaGas CEO David Cornhill said during his company’s fourth- quarter earnings call.
The announcement marks the first time a Canadian LNG proposal has been shelved due to a lack of customers.
It’s also a problem for B.C. Premier Christy Clark’s hopes for LNG development in her province — at one point she said three projects could be built in the province by 2020.
“It’s not great, I want them all to go ahead but I’ve always said that out of 20, we might not get all of them,“B. C. Natural Gas Development Minister Rich Coleman said. Other projects proposed for B.C. have been delayed. Shell Canada Ltd. postponed a final decision on its planned LNG project for the B.C. coast this month, and Malaysia’s stateowned energy company Petronas has yet to sanction its Pacific Northwest LNG project. While Canadian LNG projects are stalled, U.S. companies have begun exporting gas, contributing to a global supply glut. Bloomberg News reported that an LNG tanker bound for Brazil has left Cheniere Energy Inc.’s Sabine Pass facility in Louisiana on Wednesday filled with U. S. shale gas.
However, Vancouver-based energy lawyer David Austin said that U.S. shipment is not necessarily a sign that the nascent B.C. LNG industry has lost a race to market with U.S.-based competitors.
“The B.C. LNG race is into the Pacific and I noticed that first cargo coming out of the United States is going to Brazil,” Austin said. “South America and Europe are not markets for B.C.”
Cornhill said he believes the LNG market will balance “sometime,” but also said AltaGas will not spend any more money on the project at the moment. The company posted a $54-million net loss in the fourth quarter.
“We have made significant progress in development and permitting of the project, and we believe the project could deliver LNG to Japan at very competitive prices. However, without a meaningful off-take agreement, the consortium can no longer continue the development of the project,” Cornhill said.
AltaGas had previously delayed Douglas Channel because of a tax dispute with the Canadian federal government. Though the tax dispute has been resolved, the company paused the project “due to adverse economic conditions and worsening global energy prices.”
Low crude prices are weighing on the global LNG market, as contracts for the fuel are often linked to oil.
“The market is in the process of adjusting from being a sellers’ market for 10 years to potentially a long period like the ‘ 80s and ‘ 90s where there’s (a) surplus where the buyers are now in control and the buyers will start to dictate terms,” said Ted Michael, an LNG analyst with Genscape.
AltaGas president and chief operating officer David Harris said the company’s other LNG proposal, called Triton LNG, has also been placed on the “back burner, the slow burner.”
“We’ll see how the markets balance out in the coming years,” he said of Triton.
The company did not provide an updated timeline for Douglas Channel, which had been scheduled to begin shipping the super-cooled natural gas in early 2018.
It will, however, continue to work toward sanctioning liquid propane gas export facilities, including one near Prince Rupert, B.C. this year.
AltaGas announced it signed an agreement with Ridley Terminal Inc. to develop the export terminal, which would ship 1.2 million tonnes of propane per year to foreign markets.