The LNG Bubble Bursts
by Dermod Travis,
It seems like only yesterday that British Columbians were being told that the province was on the cusp of LNG riches. In fact, it almost was.
Last October, Finance Minister Mike de Jong predicted: “We are poised to see the final steps taken. Every step of the way, there have been detractors and naysayers and people who have dismissed the opportunities.”
Those final steps hit a speed bump last Friday when the Hawaii Public Utilities Commission nixed NextEra Energy’s proposed $4.3 billion purchase of Hawaiian Electric Industries.
The decision effectively scuttled a 20-year agreement for Fortis to sell LNG to Hawaiian Electric that had been announced eight weeks earlier with all the customary fanfare.
Natural Gas minister Rich Coleman boasted that the announcement “showcases British Columbia’s capacity to supply clean energy to new markets.”
His statement left a few things out, though. The devil is in the details.
The deal had a few hurdles to clear. Specifically, this one from Fortis’s news release: “the agreement outlines the conditions to be met…including the approval of the merger of Hawaiian Electric and NextEra Energy Resources.”
Both parties knew that approval was no slam dunk.
Last August, the state’s governor, David Ige, made it clear that “Any time and money spent on LNG is time and money not spent on renewable energy and that his administration will actively oppose the construction of any future LNG receiving stations.”
Fridays, well known in politics as taking out the trash day, lived up to its name last week.
The news out of Honolulu, Hawaii broke in B.C. at 8:00 p.m.
The merger was kaput. The export deal – a long shot at best – was pronounced dead this week.
B.C.’s long-promised pot of liquid gold has now passed through pretty well all the spin cycles.
In its 2013 election platform, the B.C. Liberal party pledged the LNG industry would create $1 trillion in economic activity and a $100 billion prosperity fund.
Speaking directly to detractors, the promise came with a tag line: “It’s no fantasy.”
The party’s campaign still referenced the B.C. government’s 2012 Labour Market outlook, which predicted the LNG industry would create up to 100,000 jobs.
A forecast scaled back after the election to something more resembling a footnote. “The Province continues working closely with the industry to maintain and update occupational workforce projections for the LNG sector. However, these projections will factor into the Labour Market Outlook only once there is a final investment decision on one or more projects.”
There was the periodic tease.
Premier Christy Clark continued to proclaim that the LNG industry had the power to fight air pollution in China, clear up smog in Los Angeles and finance increased support for the disabled.
Naysayers such as the Australia-based Macquarie Group, the Paris-based International Energy Agency (IEA) and Bloomberg News were dismissed out of hand.
Despite countless reports that the world faces a glut of LNG, the government’s website to this day proclaims that “Global trade in liquefied natural gas doubled between 2000 and 2010 and is expected to increase by another 50 per cent by 2020.”
The Macquarie Group suggested earlier this year that solutions to address the over supply “would be for certain LNG expansions not to happen or for existing capacity to be closed.”
In its November 2014 World Energy Outlook, the IEA reported that Canadian LNG costs could be among highest in the world, pegging the export price at between $13 and $14/MBtu (million British thermal unit).
LNG’s spot price is currently less than $5.00 MBtu.
Other developments, such as the Russia-China gas deal in 2014 and Japan’s restart of its nuclear energy facilities, never factored into the government’s thinking.
B.C. may still see an LNG plant, but as for that $1 trillion in economic activity and $100 billion prosperity fund the only thing left is to call time of death.
It turned out to be a fantasy, after all.
There’s an upside for the government. The public never bought the hype in the first place.
According to a 2014 Insights West poll, “only 28 per cent of British Columbians trusted the provincial government when it comes to properly handling decisions about the fledgling liquefied natural gas sector.”
Dermod Travis is the executive director of IntegrityBC.
Comments
Truth finally emerges; here I thought the hippies and First Nations were “at fault” for shutting it down. Heard it time and time again from bigoted people on this website as well as talking to people in Prince George… when in reality the market itself shut it down. 👍
Acrually with the “first nations” playing the game for more money they overplayed and now have lost out on a windfall.
Yeah, there’s got to be some way to spin it as a criticism of First Nations.
Market indeed, this is dated 2015 on the Pacific Trails Pipeline, the natural gas pipeline was approved in 2008 – so 7 years and still not all signed on to allow it to be built…?
ht tp://www.straight.com/news/519216/wetsuweten-chiefs-distance-first-nation-unistoten-camp-urge-cooperation-pipeline
The Prince Rupert Natural Gas Transmission line:
ht tps://warriorpublications.wordpress.com/tag/transcanada/ still has hurdles to cross
Yes markets are all that stand in the way of LNG
Can’t wait to see how Clark spins this.
It’s too early to call LNG investment in BC dead. The Petronas proposal for an LNG plant will make or break this initiative. It’s the last big proposal with a chance to proceed. If it goes ahead it will have a big impact in the northwest, with spinoffs all over the north and central BC.
I believe the final investment decision for Petronas is scheduled for the end of 2016, but it will not be cancelled in the run-up to the provincial election; that would be too political. My prediction is the decision will be postponed indefinitely like the Shell proposal was, and cancelled after the election. And I think this would be a shame; we need to pay the bills somehow in this province and this country.
CL
It gets worse, not only is there a worldwide over supply (glut) of LNG, Petronas is a MALAYSIAN GOVERNMENT OWNED, LNG company. Yet it seems Christy is trying hard to down play and ignore this important bit of news:
www .nationalobserver.com/2015/07/15/opinion/scandal-rocks-malaysian-government-bc-pushes-lng-deal-state-owned-gas-giant
Its time to say good night to the LNG industry Christy, but oh that’s right, we will now have beef flying through our skies!
Time for a changing of the guard!!
Ask Alberta how well that is working out for them..
And, while you are at it, ask them how the almost total reliance on oil by the previous Conservative governments is working out for them, too.
Wait, you mean the Provincial Government of Alberta is responsible for global oil prices?
No, but they are responsible for taking the decision to put all their economic eggs into a single basket. Diversification, isn’t that supposed to be the key to a robust economy? Perhaps the Conservatives in Alberta should have thought about that.
The Rube Goldberg machine that defines the fossil fuel industry is collapsing under its own weight . It’s happening all around us . It takes a denialist mind set to not see it .
On an ironic note . Leduc Alberta sports Canada’s largest roof top solar array .
Only exists because of the taxpayers subsidies it receives. Another Musk type scam.
Please tell us about your solar array?
“Whenever shares of Tesla tank on a rash of legitimate bad news, all it takes is a feel-good tweet from the master showman to get the stock soaring again.”
ht tp://www.foxbusiness.com/features/2016/07/21/elon-musk-s-ahem-secret-tesla-master-plan.html
looks like Ataloss got all his/her dark basement friends to give me thumbs down but what is always interesting never any countering facts.
The fossil fuel industry is collapsing under its own weight? You’re kidding, right?
The fossil fuel industry that sparked and drove the industrial revolution that made possible all the technological marvels and ease of living we enjoy today, that provided cheap abundant energy that made possible the existence of the middle class in the developed western world where even the lower classes, the poorest of us can live more comfortably than the nobility did in the past, the fossil fuel industry that has flourished and grown for 400 years is collapsing under its own weight? More likely it’s suffering under the weight of government regulatory burden, excessive taxation and attacks from powerful enviro-nut agencies, but it isn’t collapsing.
Yeah ice — perhaps we’d better check out how Alberta’s doing with their “change of the guard” first.
Have you noticed how many semi’s are around here these days with Alberta plates? They’re all going broke over there, and looking to BC to find work because we’re doing far better economically than most, if not all, of the other Provinces these days.
It’s not that we are doing well.. It’s that most others are doing poorly..
LNG is not dead…but won’t be a benefit to BCfor a decade or more.. A lot of money was spent wooing LNG companies for nothing… The liberals bet huge and we all lost..
“.. A lot of money was spent wooing LNG companies for nothing…’
You know what they say about hindsight: It always has 20/20 perfect vision!
And about predictions one can say: Predictions are difficult to make, especially about the future!
Finally, the global cartels and markets have many times the clout that a single provincial government can muster!
we’re doing far better economically than most, if not all, of the other Provinces these days .??? Not true . Ontario is leading the pack .
Also Alberta is doing terribly because of record low fossil methane prices and a 2.9 to 1 ratio for producing tarsands oil . If it weren’t for the 34 billion dollars a year subsidy from our taxes the tarsands would never have survived this long . And they are the least diversified province in canada due to over 43 years of idiot governments putting all their eggs in the oil basket .
What subsidies do you refer to ataloss?
Ataloss, what is this “tarsands oil” that you mention? Is it produced anywhere near where Alberta’s oilsands oil is produced?
Not true, BC is leading the pack, monthly and year over year
ht tp://www.statcan.gc.ca/daily-quotidien/160708/dq160708a-eng.htm
Last year Ontario had a budget deficit of 5.7 billion dollars while BC had a 730 million dollar surplus. Ontario also is completing its sale of Hydro One to raise a total of 9 billion to try and balance the books for next year
And these numbers are from? The BC liberals took 900 million from BC hydro and a couple hundred million from ICBC.. So 1.3 billion taken…730 million surplus.. I see it as approx 570 million in the hole..and we all get to pay more for both hydro and icbc insurance..
No-one on here is stupid enough to blame Rachel for the oil bust in Alberta Ataloss, same as no-one can rightfully blame Christy for the LNG downturn in the overall global scheme of things.
The proof is in the pudding when we see how our leaders deal with the inevitable crisis’s that come along in every industry sooner or later.
Some are too new for judgement just yet, but some are connected with governments that have a long past history of how they dealt with things then, and can pretty much be expected to “toe the party line” in the future.
There’s a lot of us on here with very long memories. If you’re not one of them, then ask someone who’s been through this a few times.
While you’re at it, ask someone who lives in Saskatchewan how they liked their “change of the guard” a few years back.
I did, and it was quite the eye opener.
Palomino…what is that , a horse with spots?? Anyhow you see lots of plates from all over and I would bet that one would see lots of plates from BC., in other provinces as well. Yes times are tough for everyone, and sometimes a change is for the good.This govt.is to arrogant and they are beginning to smell like a rotten herring. The daily lip service we British Columbians have been receiving is sickening. Change is blowing in the wind.
As a home gas consumer we in BC get no break. The all in cost of gas delivered to your home is about $8.68 per GJ before taxes. A GJ is about 50,000 btu’s shy of a million btu’s. The consumer on the PNG line west of PG gets hit even harder.
Christy might think about looking after the residents of BC before trying to sell our gas to off shore consumers at prices below what the BC consumer pays.
Our gas is dirt cheap, it’s all the other fees associated with it that makes it look like more. If you take a good look at your bill you will see at leas 70% of it has nothing do do with the price of the gas, at least 70% , maybe more.
If you read the post correctly it does say the “all in cost of gas”
Finally, someone else has noticed the same thing that’s irritated me for years. Why, EVERY time we have mega-projects designed to try to ‘capture’ some foreign market, the price of whatever it is we’re trying to export (and everything else!) goes UP here in BC.
I agree with you there. What’s the point of being resource rich if you don’t benefit from it? I suppose the obvious argument is that we benefit from the jobs and taxes that the resource industry provides, but in theory, we should still be able to receive those benefits while taking advantage, domestically, of the resources that we do own.
You pay $1.141 per GJ in Northern BC for natural gas or $1.08 per MMbtu unless you signed a private agreement and pay a lot more.
You also pay a Basic Charge, delivery charge, municipal-carbon-clean energy-GST taxes, and a storage charge for the rest of your bill to Fortis
With delivery and the taxes you pay roughly $9.44 per GJ
Fortis buys gas just as China or the US would, then charges to get that gas to your house through their pipes and meters. Don’t be fooled into thinking other countries and companies do not charge to deliver that gas to their buying public.
The total commodity charge is $1.141 per gj for the gas and $.921 for storage and transport. Your commodity price in PG is $2.06 per GJ
World price right now is $2.69 US per MMbtu or $2.84 per GJ for the commodity. US dollar is 1.31 Canadian dollars so multiply the commodity of $2.84 by .76 and you get $2.16 for a GJ of natural gas on the world stage
So the commodity price for natural gas today is (drum roll please):
World price = $2.16
PG, BC price = $2.06
Today. But the LNG developments haven’t really taken off yet, have they? So what’s going to happen if they ever do? Just like Site C, or the 2010 Winter Olympics, a whole lot of money is going to flow into the BC economy. For awhile. And, true to form, since the upper limit of price is governed by the quantity of money available to be fetched, and that quantity has just been increased, the prices of all commodities for sale for consumption here are going to rise. WE will end up paying MORE for the natural gas we use here, and for hydro, and for most other things as well. Now this isn’t really benefitting US at all. The jobs created will be fleeting for the most part. The prices, the higher prices engendered, won’t be. We are really working against ourselves with things as they are. We talk about these projects giving us the needed money to pay our bills. But do they really do that to the same extent that we’re going to be running up still bigger bills due to higher prices? I don’t think so. For if they were the overall rise in debt at a faster rate than real wealth is being created wouldn’t be happening. And it is. Time for a more thorough look at just what we’ve been doing here, and see if we can find a better way to REALLY benefit us all from the bounty that’s ours in natural resources.
Don’t forget the carbon tax.
Way back when Christie first started singing the praises of the LNG boom about to bestow its blessings on BC I predicted it wouldn’t happen. It was an easy prediction to make, based on past anti-industry and anti-fossil fuel attacks from environmentalist agencies and lefty politicians. There is almost unlimited natural gas available for fracking all over the world, so whoever gets to the market first will be the one to make the big bucks….for a while. I knew, based on past history, that there would be enough roadblocks thrown up to delay the industry for at least 10 years, by which time it would be far too late to get in on the market.
Confusing oil pipelines with LNG? Federal and provincial governments have facilitated LNG as much as possible; I’m not aware of major environmental roadblocks although Petronas has encountered some. Decisions not to proceed are based on project economics. Can’t hang this on “lefty politicians”. Oil pipelines, yes, delayed by legal challenges on the lack of proper FN consultation and an unworkable review process.
BC has a complex physical environment and a complex regulatory regime for natural resource development; we were never going to be first out of the gate with LNG. We have to be the best, which works when there is product differentiation but not with pure commodities.
CL
Confusing oil pipelines with LNG? Nope. Any new resource development these days faces tremendous hurdles, “a complex physical environment and a complex regulatory regime for natural resource development” and that includes LNG. Environuts, lefty politicos and FN’s were the impetus for that regulatory burden that stifles resource development. True, federal Conservative and provincial Liberal governments have facilitated LNG as much as possible, but that isn’t much.
Decisions not to proceed are based on project economics, and the longer it takes to negotiate the regulatory roadblocks, the worse the economics. Like I said, I could see it back then. A vast resource with tremendous potential with enthusiastic industry and eager customers, but little to no chance of fruition.
World’s LNG Liquefaction Plants as of March 2015.
On stream 37 (None in Canada)
Under Construction. 5-USA, 4-Austrailia, 2-Malaysia, 1-Russia, 1-Columbia.
Planned. Total of 19 planned of which 4 were planned for Canada.
Proposed/Under study. 29, 7 of which were in Canada.
This was the situation basically when Christy and her crew were elected.
They knew then, and they know now, that the ability for Canada to compete on the world LNG scale on such short notice was next to impossible.
What they did was use the LNG issue of creating jobs and revenue as a tool for getting elected.
Perhaps someday in the distant future we might get into the LNG game but I wouldn’t bet any big money on it.
Anything promised before an election should be disregarded as humbug.
What’s the chance of that happening.
Should read March 2016.
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