Vaughn Palmer: B.C. missing boat on LNG demand despite ‘supporting’ it

The Vancouver Sun | Vaughn Palmer | February 9 2018

VICTORIA — From south of the border Friday came news that provided a telling perspective on Premier John Horgan’s support for developing an industry to export liquefied natural gas from B.C.

“Cheniere energy seals long-term LNG supply deal with China,” read the headline in the Financial Times, drawing on an announcement earlier in the day out of Houston, Texas.

China National Petroleum Corporation signed a 25-year contract to purchase up to 1.2 million tonnes of LNG annually from the U.S.-based company, with first deliveries scheduled to start later in 2018.

“The deal is the first, direct long-term supply contract of the super-cooled fuel between a Chinese company and a U.S. LNG supplier,” wrote Emiko Terazono, a London-based correspondent for the Times.

“Chinese demand for LNG is expected to grow sharply as Beijing looks to cut its coal usage as the country’s main source of heating to gas in order to reduce pollution. The country is set to become the world’s top LNG importer by 2030.”

A followup piece from the Reuters news agency had the deal improving the chances that Cheniere would increase production at its second LNG terminal, still under construction at Corpus Christi on the Texas Gulf Coast.

The company already exports LNG from a terminal at Sabine Pass in Louisiana. The project was launched in the summer of 2011, about the same time as Premier Christy Clark began touting the prospects for LNG development here. Sabine Pass has been up and running for two years, with the Texas terminal scheduled to begin shipments next year.

Meanwhile, B.C. is still talking potential LNG development. During his recent Asian trade mission, Premier Horgan met with the Chinese, Japanese and Korean partners in LNG Canada, the Shell-backed project in the planning stages for a site near Kitimat.

Horgan reiterated the NDP government’s support for LNG development, subject to projects meeting environmental standards, and providing First Nations  partnerships, jobs and benefits for British Columbians.

But to grasp what B.C. is up against in a competitive global market, imagine Horgan’s response if asked when Chinese buyers might look forward to the first LNG shipment from B.C.

The Shell project remains active, the company having recently shortlisted two international engineering and construction consortiums for the design, procurement and construction of the multi-billion dollar facility.

But LNG Canada, and other would-be developers, are seeking relief from federal duties on imported steel. The duties would add a prohibitive cost to the prefabricated LNG modules (“trains”) that would be constructed in Asia and assembled into a terminal here in B.C.

LNG Canada has tentative plans to make a final investment decision late this year. Presuming it were a go, construction could take four years.

Thus, the earliest Horgan could propose for the first LNG tanker to leave B.C. bound for China would be 2023 — and then only tentatively.

Now imagine that the next person into the room with the Chinese buyers were a representative of Cheniere.

When can his company deliver the first tanker full of LNG? He checks the availability of ships, works out the travel time from Louisiana via the expanded Panama Canal, and gives an answer measured in weeks.

All of which puts a new meaning to the term “missing the boat.”

There are good reasons for B.C. to keep trying. For all the talk of diminishing global reliance on fossil fuels, China is expected to go on buying and consuming more natural gas.

Kitimat is many shipping days closer to Asia than the U.S. gulf ports and the ambient air temperature is lower, so it takes less energy to liquefy the gas. The B.C. product is rich in propane, butane and other liquids.

Plus B.C. needs to expand to the Asian market because North America is glutted, thanks to increased shale gas production in the U.S. Traditional B.C. customers in Eastern Canada are being lost to cheaper, more convenient American sources.

By continuing to feed gas across the border at depressed prices, B.C. effectively frees up U.S. supplies for export in liquefied form.

All the efforts to stall, obstruct and otherwise frustrate LNG development in B.C. have not reduced global demand or production by one drop. Rather it cleared the way for rival jurisdictions to capitalize on B.C.’s hesitation.

Likewise, Horgan would put the province at a further economic disadvantage if he gave in to the anti-LNG crusade of his partner in power sharing, Andrew Weaver.

Granted Horgan, even as he supports LNG development, has aligned himself with the pipeline-blockers on the oil file  But that’s more to do with B.C. not having any oil, plus natural gas is much less of a hazard when it spills.

B.C.’s delayed action on LNG is similar to the wound Canada inflicted upon itself by stalling domestic efforts to expand pipeline capacity for oil exports. The country’s oil is also captive of U.S. markets at depressed prices.

Meanwhile, American oil production has soared. The U.S. energy administration reported last week that the country’s oil production had exceeded 10 million barrels a day, for the first time since 1970. The Americans are catching up to the Russians and Saudi Arabia as the world’s leading oil producer.

As with the shale gas revolution, most of this increased oil production happened under the presidency of Barack Obama, even as he earned accolades from some environmentalists in this country for stalling construction of the Keystone XL pipeline.

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