The article you just read was brought to you by a few thousand dedicated readers. Will you join them?

Thanks for coming by The Tyee and reading one of many original articles we’ll post today. Our team works hard to publish in-depth stories on topics that matter on a daily basis. Our motto is: No junk. Just good journalism.

Just as we care about the quality of our reporting, we care about making our stories accessible to all who want to read them and provide a pleasant reading experience. No intrusive ads to distract you. No paywall locking you out of an article you want to read. No clickbait to trick you into reading a sensational article.

There’s a reason why our site is unique and why we don’t have to rely on those tactics — our Tyee Builders program. Tyee Builders are readers who chip in a bit of money each month (or one-time) to our editorial budget. This amazing program allows us to pay our writers fairly, keep our focus on quality over quantity of articles, and provide a pleasant reading experience for those who visit our site.

In the past year, we’ve been able to double our staff team and boost our reporting. We invest all of the revenue we receive into producing more and better journalism. We want to keep growing, but we need your support to do it.

Fewer than 1 in 100 of our average monthly readers are signed up to Tyee Builders. If we reach 1% of our readers signing up to be Tyee Builders, we could continue to grow and do even more.

If you appreciate what The Tyee publishes and want to help us do more, please sign up to be a Tyee Builder today. You pick the amount, and you can cancel any time.

Support our growing independent newsroom and join Tyee Builders today.
Before you click away, we have something to ask you…

Do you value independent journalism that focuses on the issues that matter? Do you think Canada needs more in-depth, fact-based reporting? So do we. If you’d like to be part of the solution, we’d love it if you joined us in working on it.

The Tyee is an independent, paywall-free, reader-funded publication. While many other newsrooms are getting smaller or shutting down altogether, we’re bucking the trend and growing, while still keeping our articles free and open for everyone to read.

The reason why we’re able to grow and do more, and focus on quality reporting, is because our readers support us in doing that. Over 5,000 Tyee readers chip in to fund our newsroom on a monthly basis, and that supports our rockstar team of dedicated journalists.

Join a community of people who are helping to build a better journalism ecosystem. You pick the amount you’d like to contribute on a monthly basis, and you can cancel any time.

Help us make Canadian media better by joining Tyee Builders today.
We value: Our readers.
Our independence. Our region.
The power of real journalism.
We're reader supported.
Get our newsletter free.
Help pay for our reporting.

BC LNG Lost Its Window of Opportunity, Study Finds

Projects unlikely to be economic for another decade: Oxford Institute energy report.

By Andrew Nikiforuk 22 May 2015 |

Andrew Nikiforuk is an award-winning journalist who has been writing about the energy industry for two decades and is a contributing editor to The Tyee. Find his previous stories here.

This coverage of Canadian national issues is made possible because of generous financial support from our Tyee Builders.

The window of opportunity to capture Asian gas markets has eluded proposed liquefied natural gas projects in British Columbia, and as a consequence it is unlikely that any LNG projects will likely be commissioned or economic for another decade.

That's the central conclusion of a new study on the prospects for natural gas extraction and export in Canada by the London-based Oxford Institute for Energy Studies released earlier this month. The institute operates as a non-profit charity that has looked at the economics and politics of energy since 1982.

Despite large volumes of shale gas and government hype over the industry, the study found that changing energy markets, global price volatility, increased competition, and LNG cost overruns have dramatically changed the demand picture for high-risk and capital intensive LNG projects around the world.

Even Asian demand for natural gas has softened significantly over the last year. Demand for imported gas in Japan is now "flat," and in Korea it has "dampened," the report says.

China's thirst for natural gas has also slackened since 2010 due to pipeline expansions and the signing of long-term LNG contracts.

According to Cambridge Energy Associates, spot LNG imports into China dried up last summer, "and spot prices last winter, usually a peak demand season, were reported to be less than $7 per million BTU, from as high as $20 several years ago."

(The BTU is a standard unit of energy which represents the amount of heat energy needed to raise the temperature of a pound of water by one degree Fahrenheit. It is equal to 1055 joules, another common energy measurement.)

Furthermore, LNG construction in the United States, Australia and other countries will be bringing more gas to global markets between 2015 and 2020, explains the Oxford Institute study.  

"According to this market analysis the Asian markets will be well supplied in the period 2015-2020," says the report.

Nineteen projects in the balance

As of March 2015, 19 completed applications to build LNG export facilities in British Columbia have been submitted before the National Energy Board. Another five applications have been submitted for development in eastern Canada.

The B.C. government, which wants to see three projects built by 2020, has lowered natural gas royalties, corporate taxes and LNG taxes to entice Asian investors.

If approved, the 19 projects would force a tripling of natural gas production in Canada, from three billion cubic feet a day to nearly 10 billion cubic feet a day. To support that level of production, industry will have to drill thousands of unconventional wells and then crack low grade rock over vast geographies with hydraulic fracturing in northeastern B.C.

582px version of Proposed pipeline projects in BC
Proposed liquefied natural gas projects in British Columbia. Adapted from the LNG in BC website.

The provincial government has yet to do a cumulative impact assessment on how the drilling and fracking of thousands of unconventional wells and their associated well pads, pipelines and roads would impact wildlife, fragment the land, pollute the air or affect existing economic sectors such as agriculture and forestry.

Not one liquified fractured gas project has yet made a final investment decision due to "high [capital expenditure] costs, complex environmental permitting and the individual circumstances of the project leaders," states the Oxford Institute study.

One of the leading project contenders, Pacific NorthWest LNG, is led by Petronas, the national oil company of Malaysia. But the study notes that Petronas posted net losses of US$1 billion in the fourth quarter of 2014 "due to significant asset impairment (write-downs) as a result of lower oil prices and lower revenue generated for the quarter."

To be economic, Canadian LNG projects will require gas prices of around US$10.3 to $11.6 per million BTU to break even which, in turn, requires oil prices between US$76 and $90 a barrel. (Global natural gas prices are linked to oil prices.)

As long as crude oil prices remain around US$50 per barrel, Canadian LNG projects "will not break even, unless there is a dramatic drop in construction and shipping costs," concludes the study.

In contrast, U.S. LNG projects can be built at US$6.5 to 7.5 per million BTU, which makes Canadian LNG very expensive by global standards.

Displacement opportunities 'limited'

The Oxford Institute study also looked at how various Canadian LNG projects would fit the medium to long-term demand for the product.

In a scenario where demand is on the lower end, only three proposed B.C. projects make the probable list. They include "Canada LNG, Pacific NorthWest LNG and a smaller LNG scheme such as Douglas Channel or Cedar LNG."

Apart from the oilsands, which now consumes about 1.6 billion cubic feet of natural gas to produce nearly 2 million barrels of oil each day, "the opportunity for natural gas to displace competing fuels in traditional space-heating and industrial markets in Canada seems to be relatively limited," the study says.

Due to the shale gas revolution in the U.S., Canadian natural gas exports to that country declined by more than 20 per cent between 2008 and 2014.

The report also found that Canadian LNG projects also "face competition with the next generation of new and brownfield Australian LNG projects which enjoy lower or similar freight costs to Asian markets."  [Tyee]

Read more: Energy, BC Politics

Share this article

The Tyee is supported by readers like you

Join us and grow independent media in Canada

Facts matter. Get The Tyee's in-depth journalism delivered to your inbox for free


The Barometer

Tyee Poll: What Coverage Would You Like to See More of This Year?

Take this week's poll