The rush to get BC’s unconventional gas to overseas markets is based on Asian demand and a significant price differential between North American and Asian markets. The North American gas boom has caused a glut in supply and driven down prices. Unconventional natural gas is now worth $3-4 in North American markets, whereas it is worth approximately four times that in Asian markets. There is uncertainty as to whether the high Asian price will continue. If a number of LNG projects become operational around the world there could be a global supply glut that would drive the price down.
Canada is not the only country hoping to cash-in on the Asian market. Qatar, Australia, US, and China, among others, are also developing LNG resources. There is considerable competition between jurisdictions with companies vying for the most affordable and secure location before making final investment decisions. Not only does this bring in to question whether or not BC’s gas would make it to market in time, but it could also mean a global glut in supply causing prices to decrease.
BC has both advantages and disadvantages in the global scene. Advantages include: a colder climate meaning less energy is needed to cool the gas to a liquefied state at minus 162 degrees, a shorter shipping distance to Asia, large quantities of gas and an established industry, and lower labour costs than places like Australia. A key disadvantage is high infrastructure costs. Pipelines and LNG terminals need to be built from the ground up, but in the US they plan to modify existing infrastructure. Higher infrastructure costs in BC may necessitate higher gas prices.
Managing Expectations: Assessing the Potential of BC’s Liquid Natural Gas Industry
Pawel Mirski | Canada West Foundation | 2013
This report examines how much competition BC will face in gas markets in Asia. It finds that a shorter list of projects will proceed to construction due to BC ‘coming late to the party’, the ability for China to find more affordable and strategic alternatives to LNG, and BC having higher supply costs than other jurisdictions.