LNG projects face ‘head­winds’ exec says

The Prince George Citizen - - SPORTS - Dan HEAL­ING

CAL­GARY — Plen­ti­ful cheap nat­u­ral gas is no guar­an­tee that a Cana­dian LNG ex­port in­dus­try will develop, says an ex­ec­u­tive with Progress En­ergy Canada, a di­vi­sion of Malaysia’s state-owned Petronas which can­celled its $36-bil­lion Pa­cific NorthWest LNG project in July.

The de­ci­sion was dif­fi­cult to make but “head­winds were too great” for the part­ner­ship to green light the West Coast megapro­ject, said Den­nis Lawrence, vice-pres­i­dent of pro­duc­tion for Progress, dur­ing a panel dis­cus­sion at the Cal­gary En­ergy Roundtable on Wed­nes­day.

Lawrence said de­lays meant the project missed its op­por­tu­nity to en­ter the global LNG mar­ket when it had a good chance to thrive.

“We think it may be a bit of a wake-up call to us as an in­dus­try, to gov­ern­ments, to reg­u­la­tors within Canada that time is ac­tu­ally of ut­most im­por­tance on these projects, that de­lays and long reg­u­la­tory time­lines can ul­ti­mately have an im­pact on whether projects go ahead or not,” he said.

Lawrence said the con­sor­tium’s re­search showed that its north­east­ern B.C. Mont­ney gas wells would be com­pet­i­tive with nat­u­ral gas pro­duced in the north­east­ern U.S. and it is now fo­cused on de­vel­op­ing ac­cess to those North Amer­i­can mar­kets.

Diver­gent opin­ions ex­pressed at the con­fer­ence re­flect the un­cer­tain sta­tus of Canada’s LNG in­dus­try, with nearly two dozen projects pro­posed and only one – the rel­a­tively tiny Wood­fi­bre LNG – ap­proved for con­struc­tion by its own­ers.

Andy Calitz, CEO of the $40-bil­lion LNG Canada project led by Royal Dutch Shell PLC, said he re­mains op­ti­mistic about the in­dus­try’s prospects de­spite lower global LNG prices and grow­ing com­pe­ti­tion.

He said he be­lieves Canada’s low-cost gas and rel­a­tively closer lo­ca­tion to Asia makes it com­pet­i­tive with other coun­tries vy­ing to sell liq­ue­fied nat­u­ral gas around the world. But he con­ceded the higher cost to build liq­ue­fac­tion fa­cil­i­ties and pipe­lines in Bri­tish Columbia will af­fect an in­vest­ment de­ci­sion ex­pected next year.

“The mar­ket to im­port LNG is now grow­ing to 260 mil­lion tonnes per year in 38 coun­tries... There is a mar­ket out there,” he said, not­ing China’s new ap­petite for gas to re­place coal and grow­ing de­mand from coun­tries such as In­dia, In­done­sia and Thai­land.

De­te­ri­o­rat­ing world prices blamed by the Pa­cific NorthWest LNG part­ners were also cited by de­vel­op­ers of the $28-bil­lion Aurora LNG project when it was can­celled in Septem­ber.

“We’re ac­tu­ally very pes­simistic,” said pan­el­list Dave Tulk, a part­ner with con­sult­ing com­pany Gas Pro­cess­ing Man­age­ment Inc., adding nei­ther the in­dus­try nor gov­ern­ments are work­ing to­gether to come up with a “mas­ter plan” for the in­dus­try.

“The chal­lenges that (LNG Canada) has to get over in terms of pipe­lines, to dig a 670-kilo­me­tre pipe­line, go through two moun­tain ranges, to get all that in place with­out the full sup­port of the fed­eral and pro­vin­cial gov­ern­ments and in­dus­try, we just think that’s go­ing to be a dif­fi­cult chal­lenge,” he said.

In a sep­a­rate pre­sen­ta­tion, David Hill, ex­ec­u­tive vice-pres­i­dent of ex­plo­ration and busi­ness de­vel­op­ment for En­cana Corp., said he was sur­prised at how quickly Amer­i­can com­peti­tors were able to es­tab­lish an LNG ex­port­ing in­dus­try ahead of Canada.

CP FILE PHOTO

Lelu Is­land, near Prince Ru­pert, is seen March 8, 2013. The is­land was the pro­posed site of the Pa­cific NorthWest LNG project.

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