Canadian LNG Prospects Dim: IEA

 

British Columbia faces intense competition from the rest of the world in developing its liquefied natural gas industry in part because projects will not be viable at today's low gas prices, IEA says.

 

In a five-year outlook on global demand for natural gas, the Paris-based agency throws cold water on the B.C. government’s hopes of being home to three liquefied natural gas projects by 2020.

 

Procuring the required skilled labour is more difficult and costlier in this environment. Proceeding with such large cost items is challenging under any market condition, “but the plunge in oil prices will certainly make companies think twice before pushing ahead.”

 

The IEA points to the decline in Asian demand as consumers there found alternatives to pricey LNG, “One of the key – and largely unexpected – developments of 2014 was weak Asian demand,” IEA executive director Maria van der Hoeven said.

 

Although Canada’s LNG projects would be closer to Asia than projects in the United States, they suffer from higher capital costs and follow the traditional integrated upstream model; their remote location is also adding to the investment bill.

 

"Indeed, the belief that Asia will take whatever quantity of gas at whatever price is no longer a given. The experience of the past two years has opened the gas industry's eyes to a harsh reality: in a world of very cheap coal and falling costs for renewables, it was difficult for gas to compete."