B.C. projects stalled on weak demand

continued from FP1

It departed from Cheniere Energy Inc.’s Sabine Pass export facility in the U.S. Gulf Coast last week. A second LNG tanker owned by BP PLC was also approaching the canal early Tuesday, according to websites that track seaborne vessels.

The expansion of the canal, which was widened and re-dredged to allow much larger vessels to pass through, will significantly reduce the cost of shipping liquefied natural gas to Asian markets from Atlantic waters. Before the expansion, the oversized LNG carriers were forced to travel around South America to reach some of the biggest LNG markets like Japan and South Korea.

Even so, the expansion will have a limited effect on the economics for new LNG developments on Atlantic coastlines like the U.S. Gulf Coast. “The way the global market has changed the last couple of years, and all of the supply that’s coming on, its significance is going to be less than what was thought at the time,” says Robert Ineson, the managing director for North American natural gas at IHS Energy.

Demand for the product is waning in most Asian markets that were largely responsible for bringing about the initial surge of demand. The five largest markets in Asia have seen decreased imports of LNG for four consecutive years, according to the International Energy Agency.

In its medium-term outlook for natural gas the IEA expects low natural gas prices to persist for at least the next five years.

Ineson said the influx of new capacity coming online coupled with tepid demand in Asia could significantly reduce LNG traffic through the Panama Canal compared to estimates a few years ago. “Our expectation is that the differential between the Atlantic and Pacific basins will narrow to the point that you won’t see inter-basin trade at all,” he said.

That oversupply has quickly dragged down prices in Asia and Europe. LNG spot prices in Japan for the month of June averaged US$6.24 per million British thermal units of gas (MMBtu), compared to US$15 two years earlier.

The shrinkage in demand comes just as the U.S. prepares to rapidly increase its LNG export capacity. Houston-based Cheniere Energy’s Sabine Pass is currently the only operating LNG export facility, which came online in 2015. But another four projects currently under construction are expected to add more than six billion cubic feet per day of new capacity by 2020. Those projects could be forced to run their operations at as little as half their intended capacity should the gas glut continue, Ineson says.

Meanwhile, on Canada’s west coast project proposals are stalled in the approval process as operators likewise face weakening demand for natural gas. Earlier in July a consortium of companies led by Shell delayed a final investment decision on their proposed LNG Canada Project in Kitimat, B.C.

The CEO of the consortium, Andy Calitz, said the global energy market was “in turmoil” during the announcement of the decision.

As of yet, not one of the 20 or so proposed projects along the British Columbia coast has reached a final investment decision. “The market fundamentals do not encourage companies to take final investment decision on new capacity,” Ineson says.

Despite lousy economic conditions in the medium term, LNG exports from the Gulf Coast will still see some benefit from the Panama Canal expansion in the near term. More than half of the new capacity coming online in the U.S. in the next three years is already contracted for buyers in Asia, according to analysis by Bloomberg New Energy Finance.

Those suppliers will have much lower shipping costs compared to a few years ago. A report by RBC Capital Markets published before the canal expansion said LNG shipping costs from the U.S. Gulf Coast to Japan averaged about US$2.33 per 1,000 cubic feet, 42-per-cent higher than the next most expensive jurisdiction it evaluated. The new shipping route is nearly half the distance that it was before the expansion, reducing the trip by thousands of kilometres. audience versus a niche audience needs to be answered,” said James Cakmak at Monness, Crespi, Hardt & Co.

The company, struggling with flat user growth and lower spending by advertisers, is doubling down on efforts to attract users. It is also working to better define its role as it rolled out a video ad this week that showed it as the place to go for live news, updates and current events.

The company has also pushed further into live video and streaming and has signed deals with Major League Baseball and the NHL to revive user growth.

“The good news is these content deals could potentially make them a more attractive acquisition target for a media company looking to expand digital distribution,” Cakmak said.