Russia China Pipeline Deal – Elephant in the Room at BC LNG Conference

christy-clark-lng

Last week, the BC Government held its second annual LNG In BC Conference, with over 1,400 delegates representing some of the world’s top players in the natural gas industry. The province’s Minister of Natural Gas Development Rich Coleman noted that this year’s conference saw an increase of almost 1,000 delegates.

Most panels centered on the potential opportunity for a BC LNG industry, but the elephant in the room at the Vancouver Convention Center was a natural gas pipeline deal signed between Russia and China on the eve of the conference. Though barely addressed from the stage, it provided a powerful reminder to delegates of the competitive international market the province will have to navigate to make its LNG vision a reality.

Bad timing for BC LNG players

Russia’s completion of a $400-billion deal to satisfy approximately one third of China’s gas needs is bad timing for BC LNG, as companies such as Chevron and Petronas look towards final investment decisions over the next year.

Natural gas will be supplied to China for the low cost of $10-$11 a unit, providing China a bargaining advantage to reduce energy prices from other potential trading partners in North America. Canadian exporters has their hopes set on $16/unit, based on the higher prices Japan is paying following the Fukushima-driven shutdown of its nuclear sector.

Russian leader Vladimir Putin said that this is the biggest contract in the history of the country’s gas sector, a reality which was absent from virtually all conversation on the global natural gas market discussed at the conference.

Clark downplays contract’s significance

Premier Clark brushed off questions as to whether this agreement would have a negative impact on BC’s race to export LNG, saying that her government had anticipated the deal. Much of this hinges on whether the province can secure final investment decisions and nail down competitive tax rates quickly enough to be a credible player in the LNG market. Given that many of these details are far from being confirmed, questions arise as to whether LNG is the ‘generational opportunity’ it is being presented as for BC.

With 14 LNG projects proposed alongside intense global competition, Premier Clark acknowledged that so far, only two of these projects are nearing final investment before the next election. The smaller Woodfibre LNG near Squamish looks like the best bet for the first project, but it is meeting with growing opposition from local groups.

Pressure on to speed up BC LNG

Read the rest:  Commonsense Canadian

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