LNG Dreams Brought to Earth

resources | BCBusiness

While B.C. dithers over plans for a natural-gas infrastructure, the rest of the world is already busy building capacity to meet expected demand

If there ever was doubt that B.C.’s LNG dream is in trouble, the Canada West Foundation just erased it all with a research report entitled “Managing Expectations: Assessing the Potential of B.C.’s Liquid Natural Gas Industry.”
Combine the conclusions of this report with growing unease among a number of First Nations organizations over their economic opportunities and the environmental concern over “fracking” (an industry technique for fracturing shale gas rock to make the gas flow), and you can’t help but pray that the Clark government is working very hard on a Plan B.
There are two very big enemies of this LNG dream: one is stiff competition from other potential suppliers that are way ahead of B.C. in their own LNG developments; the other is the need to make complex decisions about wealth distribution in a New York minute .
The Canada West Foundation estimates that Asian natural gas demand is projected to increase by 216 billion cubic metres (bcm) per year. Traditional suppliers to Asia already have almost half of that capacity under construction—97 bcm/year. Another 90 bcm/year has completed preliminary engineering and design, and another 82 bcm/year of capacity has been announced. If all of this proceeds, it adds up to 269 bcm/year—52.9 bcm/year more than anticipated market growth in Asia.
The most advanced B.C. projects are at the early preliminary engineering and design stages.”
Ouch. The report goes on to point out that most of this demand is coming from China, and China has the world’s largest undeveloped shale gas resources in-house, not to mention lots of potential (and lower cost) supply options closer to home than B.C.
And more salt to the wound: B.C.’s hope for trillions in revenues from its LNG exports are tied to a very high export price which will evaporate if, as the Foundation’s report suggests, “existing suppliers choose to aggressively defend market share.” In that case, “such competition would disadvantage B.C. natural gas producers, whose supply costs are high relative to many competitors.”
While the foundation’s report paints a troubling picture, it still holds out hope for a modest success—assuming the province gets off the pot and makes all this happen yesterday. That’s the time factor, and that’s where the other roadblock shows up: First Nations.
Generally supportive of the LNG concept, First Nations groups are now looking at the potential economic benefits of participating in this industry and weighing it against environmental risks. Sharlene Gale, chief of the Fort Nelson First Nation, and Lana Lowe, the band’s lands director, in an op-ed article in the Globe and Mail, are suggesting that the province needs to put a lot on the table, and quickly.
“To have peace there must be sharing,” Gale and Lowe argue. “This became clear to us as we watched the events unfold in Elispogtog (New Brunswick). To truly have peace, we as a people must be able to share in the wealth and protect the integrity of our land. We need new mechanisms for decision making and both the industry and government must be willing to change their ways.”
Now, when have the province and First Nations ever been able to reach an agreement on anything quickly? The history of treaty negotiations alone suggests that the concept of a decision in a New York minute is alien to both parties. But that’s what is needed if even a modest LNG dream is to be realized.


 Don Whiteley is a natural resources writer based in North Vancouver.