Global supply glut threatens British Columbia’s LNG projects – by Brent Jang (Globe and Mail – April 8, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Most liquefied natural gas export projects are at risk of being cancelled in North America as a result of a looming global glut of LNG, putting a damper on British Columbia’s energy dreams.

Moody’s Investors Service Inc. issued a stark outlook for the fledgling North American LNG industry, arguing it doesn’t make economic sense to invest billions of dollars on each venture especially as Asian buyers slow down their LNG orders for new LNG supplies.

Moody’s said the “vast majority” of North American proposals face outright cancellation. “Many sponsors – including those in the U.S., Canada and Mozambique that have missed that window of opportunity as oil prices have declined – will face a harder time inking the final contracts, most likely resulting in a delay or a cancellation of their projects.”,” the credit rating agency said.

There are 19 B.C. LNG projects vying to export to Asia. They include 10 export licences that have been approved by the National Energy Board

In the global LNG industry, most contracts have maintained their historic link to crude oil prices, and that has meant declining revenue for LNG suppliers amid the slump in oil markets. And since major LNG projects are led by large energy companies, the oil sector’s downturn has eroded corporate revenue generally, forcing firms to curtail capital spending, Moody’s said.

Moody’s warns that the prospects appear bleak for the bulk of B.C. projects and most of the ventures elsewhere in North America, notably nearly 30 proposals in the United States and a handful in Central and Eastern Canada.

“We expect that global liquefaction capacity will be well in excess of demand for the remainder of this decade, as demand will grow more slowly than supply,” according to the report, titled “Lower oil prices cause suppliers of LNG to nix projects.”

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