‘Window of opportunity’ for new LNG projects is gone because of supply glut, consultancy says – by Yadullah Hussain (National Post – September 4, 2015)

The National Post is Canada’s second largest national paper.

The window to build liquefied natural gas projects in Canada and elsewhere has closed amid a global supply glut, says global energy consultancy Wood Mackenzie.

“There is a clear reluctance by companies to stand down, but the reality is that the window of opportunity closed over six months ago for everyone, not just for Canada,” Noel Tomnay, vice-president global gas and LNG research for Wood Mackenzie said in an interview.

Qatar and Australia led the first two waves of LNG development with the U.S. spearheading the third wave, even as Canadian and East African proposals were stalled.

“Canada’s biggest competitor is not the U.S. — it is probably Mozambique,” Tomnay said, noting that these two regions would probably the play the role of niche, “strategic resources” for investors in the next wave of development that will cater to demand after 2022.

Proposed LNG projects are under pressure as prices are stuck in the US$7-US$8 per million British thermal unit range, compared to the US$11-US$12 needed long-term to make project economics work.

LNG deliveries to the key markets of China, Japan and South Korea are also falling at the same time that 140 million tonnes per annum of new LNG capacity is being built, to add to the 250 million tonnes per annum already on stream.

“The outlook for longer-term incremental LNG demand growth in China is also being negatively affected. And with lower industrial output and power generation competition increasingly characterising other key Asian LNG markets, like South Korea, Asian buyers are not in a hurry to finalise new LNG contracts,” Tomnay said in a report.

British Columbia has attracted as many as 20 LNG proposals, but none has committed to a positive final investment decision (FID) yet.

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