David Rosenberg: The bullish case for LNG, a reliable energy source investors should tap into

Liquefied natural gas (LNG) should see strong growth in the next decade and more, writes David Rosenberg and his team.

By David Rosenberg and Brendan Livingstone

Financial Post

The Russia-Ukraine war is bringing to the forefront the importance of energy security, which has been neglected in recent years as supply exceeded demand and governments felt increased political pressure to reduce our reliance on fossil fuels.

However, with households confronting much steeper energy bills, which are at risk of rising further as winter approaches, the focus has shifted back towards providing reliable energy solutions at favourable costs. Liquefied natural gas (LNG), which involves cooling natural gas to a liquid state, is an attractive solution because it allows for an efficient way for transportation and storage — to areas not endowed with natural gas reserves — and it is relatively clean in terms of production and combustion.

Over the next decade plus, we see strong growth in LNG — and all that goes with it — and so we believe investors will benefit from seeking out exposure.

LNG is natural gas that has been converted to a liquid by cooling it at -1,620 C (-2,600 F). In its liquid state, natural gas is about 600 times smaller than when it is in a gaseous state, making it substantially easier to store. In addition, the liquefaction process allows for the transportation of natural gas to places where natural gas pipelines are not feasible or do not exist.

Export facilities receive natural gas from producers by pipeline and then liquefy it for transport via LNG ships. Once the tankers reach their destination, LNG is offloaded at import terminals, stored in cryogenic storage tanks and then returned to a gaseous state. After which, natural gas is transported via pipelines to customers.

In recent years, the United States has become a major player in LNG, increasing its export capacity to about 10.78 billion cubic feet per day at the end of 2021 from less than one bcf/d per day in 2015. By the end of 2022, the U.S. is poised to become the largest LNG exporter in the world. About half of U.S. LNG exports go to five countries: South Korea (13 per cent), China (13 per cent), Japan (10 per cent), Brazil (9 per cent) and Spain (6 per cent).

LNG produces 40 per cent less carbon dioxide than coal and 30 per cent less than oil, making it among the cleanest fossil fuels. In addition, it drastically reduces emissions of nitrogen oxide, and it emits almost zero sulphur and particulate matter. As a result, due to its relatively favourable emissions profile — and, critically, its reliability as a fuel source — we see LNG as a great complement to renewable energy as governments work towards a reduction in greenhouse gas emissions.

Some pundits have labeled LNG as a “transition fuel,” but this understates its role in the energy mix of the future since it is a great backup for the natural intermittency of renewables such as wind and solar.

A McKinsey & Co. report — the Global Gas Outlook to 2050 — estimates LNG demand will grow by 3.4 per cent per annum until 2035, requiring approximately 100 million metric tons of additional capacity. While it believes that demand will then slow substantially — to growth of 0.5 per cent between 2035 and 2050 — this will still necessitate more than 200 million metric tons of new supply.

Most of this increase is expected to come from the United States, with smaller contributions from Canada, Russia, East Africa and potentially the Middle East.

Against a backdrop of strong growth over the next decade or so, especially in the U.S., we believe investors should look to have exposure to LNG in a portfolio. Renewable energy undoubtedly has the greatest future growth potential — as governments strive for “net zero” by 2050 (193 parties have signed onto the Paris Agreement) — but the reliability of LNG, combined with the lower associated emissions (relative to other fossil fuels), means governments can concurrently improve energy security while simultaneously reducing pollution.

The importance of having LNG exposure, especially during energy crises, has been on full display this year. Bloomberg Intelligence’s LNG Liquefaction Peer Group — an equally weighted equity index of some of the major LNG producers globally — is up 25 per cent this year as of the end of August, versus the 17 per cent decline for the S&P 500.

Beyond its positive future growth profile, LNG stocks also have the benefit of being attractively priced. The group trades at an EV-to-EBITDA ratio of 4.7x, well below its 10-year average (8.6x), and considerably less than the S&P 500 (13.5x). Other ways to play the LNG theme are through companies involved in the regasification process, transportation (tankers) and infrastructure construction.

David Rosenberg is founder of independent research firm Rosenberg Research & Associates Inc. Brendan Livingstone is a senior markets strategist there. You can sign up for a free, one-month trial on Rosenberg’s website.

U.S. Shale Giants Want In On The Global LNG Game

By Irina Slav - Feb 09, 2023

• U.S. gas producers are getting increasingly interested in LNG exports.
• 
  
• Producers such as Devon Energy and Chesapeake are looking to get exposure to international LNG markets.
• 
  
• Market observers expect demand from Asia to start climbing, now that prices are off their peak from last summer.

Over the course of just a few years, the United States became one of the top three exporters of liquefied natural gas. Last year, it was the biggest supplier of LNG to Europe. This was made possible by a handful of companies that invested billions in liquefaction plants along the Gulf Coast, with another handful coming in the next couple of years. But competition is intensifying.

Energy Intelligence reported this month that U.S. gas producers are getting increasingly interested in LNG exports. The report cited the chief executive of Devon Energy as saying the company was looking into diversifying with LNG exports to get some exposure to international markets.

"We're not going to be big LNG players like Cheniere or Freeport or anything like that," Rick Muncrief said at the NAPE conference in Houston last week. "I mean, from our perspective, it's how can we get some exposure in international markets and help our allies around the world. We do the same thing with oil."

The decision makes perfect sense. Demand for liquefied natural gas globally is on the rise, and strongly, after Europe joined the LNG party. Even though the EU's emission-cutting plans discourage European buyers from securing long-term LNG import deals, which U.S. producers find to be a problem, U.S. LNG will continue to flow to Europe.

At the same time, market observers expect demand from Asia to start climbing, too, now that prices are off their peak from last summer. Indeed, Bangladesh recently bought an LNG cargo after months of abstaining from such imports because of prices. It also plans to buy several more if prices remain where they are. And if more U.S. gas producers enter the LNG space, chances are that prices will get a ceiling once their facilities start operating.

Earlier this year, BloombergNEF predicted that U.S. LNG export capacity would soar to 169 million tons by 2027. That would make the United States the world's biggest LNG exporter, far ahead of Qatar, which plans to expand its capacity to 110 million tons by 2026.

"The US is in the lead because of its flexible contract terms and the competitive landscape of project developers," said BloombergNEF global LNG specialist Michael Yip. "Its aggressive but transparent pricing and reliability as an LNG supplier has made it easy for these new projects to secure contracts."

That's just the big guns in LNG exports. Add to that the smaller gas producers that are diversifying into LNG exports, and the potential future dominance of the U.S. on international LNG markets becomes even more pronounced. As long as the gas flows as it does now.

Earlier this year, two gas CEOs warned there might be a slowdown in drilling activity because of prices. At such prices, profitability is hard to come by, Adam Rozencwajg, the natural resources investor from Goehring & Rozencwajg, told Oilprice. And that may put a lid on the supply of gas.

"Companies with remaining core Tier 1 acreage can make a return at today's gas price—those are few and far between," Rozencwajg said. "More importantly, companies have come to realize just how difficult it is to maintain high-quality drilling inventory. In light of that, they are reluctant to increase activity and pull forward the inevitable moment they'll be short of high-quality drilling prospects."

What this means is that sooner or later, prices will go up. This will make LNG exports even more lucrative. And shareholders who mind increased drilling might change their minds.

"Most of our investors get it and they think it's a good idea," Chesapeake's Nick Dell'Osso, one of those CEOs who warned about lower drilling activity this year said at NAPE.

"At the end of the day, the way I describe it to our investors, is this is not arbitrage capture. This is diversification of market. The US gas is being sold in international markets. We should have exposure to that. That's diversification of your product sales points and ultimately like any other portfolio diversification."

Indeed, diversification has proven to be the optimal strategy both for producers and for consumers, as any European Union official is sure to tell you if you ask them.

By Irina Slav for Oilprice.com

 

Galveston LNG Bunker Terminal Moves Ahead

Illustration courtesy Galveston LNG Bunker Port

PUBLISHED APR 9, 2024 1:39 PM BY THE MARITIME EXECUTIVE

 

Galveston LNG Bunker Port has filed applications with the United States Army Corps of Engineers (USACE) to build its small-scale LNG terminal on Shoal Point in Texas City, Texas. If approved, the project would be the first purpose-built LNG bunker terminal in the area, and the port's second LNG fueling service.

The planned terminal includes two liquefaction trains capable of putting out 600,000 gallons of LNG per day, two 3-million-gallon storage tanks, a bunker vessel loading berth, and associated marine and loading facilities.

In addition to the USACE application, partners Seapath Group and Pilot LNG have also asked the Texas Railroad Commission (TRRC) and the United States Coast Guard (USCG) for permission to build. 

"This facility is a critical investment into the resilience of the United States' maritime infrastructure," said Joshua Lubarsky, President of JV partner Seapath Group.

LNG is one of the most popular options for dual-fuel vessel orders. According to data from DNV, there were about 470 LNG-powered vessels in operation globally as of the end of 2023, with over 500 more on order. A record 240 LNG-fueled ship orders were placed in 2021, 222 more in 2022 and another 130 in 2023. The LNG-powered fleet should exceed 1,000 vessels by 2027, DNV reports. 

The growth has been particularly pronounced in the container ship, car carrier, and cruise ship sectors, and Galveston is a major cruise port. 

The new terminal expands on previous efforts to establish Galveston as a hub for LNG fueling. In 2021, the Port of Galveston and Stabilis Solutions agreed to launch the use of LNG as a marine fuel at the port. Stabilis provides the fuel, and Seaside LNG provides the bunkering barge. Customers include Carnival Jubilee, which became the first ship on the Gulf Coast to receive ship-to-ship LNG bunkering in December 2023. 

"The Galveston Wharves views LNG fueling of marine vessels as an important step in our commitment to environmental stewardship," said Rodger Rees, Port Director and CEO, in 2021. "With the number of LNG-fueled vessels in the global fleet growing rapidly, having LNG fueling services in the port is an important step in our commercial growth."

 

Study: LNG Will Be Most Affordable Compliance Option for EU GHG Rules

An LNG-powered boxship under construction (CMA CGM file image)

PUBLISHED JUN 15, 2023 7:25 PM BY THE MARITIME EXECUTIVE

 

LNG has its critics in environmental circles, but its fiscal attractiveness is  clear, according to industry advocacy group SEA-LNG. Setting aside any debate  about LNG's environmental merits, it will be the least-cost option for boxship owners who need to meet EU compliance requirements for GHG reduction, the group argues in a newly-released analysis. 

LNG is one of the most affordable marine fuels under normal market conditions, and it has a lower emissions profile than HFO or VLSFO. Using SEA-LNG's estimate for LNG's well-to-wake greenhouse gas reduction benefit - about 20 percent below VLSFO - switching to LNG is itself enough to comply with the FuelEU Maritime GHG reduction requirements out through the year 2039. After that, operators would have to blend in varying proportions of costlier bio-LNG and e-LNG. (E-LNG may be the most expensive alternative fuel, according to the Maersk McKinney-Moller Center for Zero Carbon Zhipping). 

As the proportion of "green" fuel in the blend goes up to meet strengthened requirements, so does the cost for compliance - except for ammonia, which declines in price and becomes cheaper than a 50 percent gray / 50 percent renewable LNG mix by 2050. Blue ammonia (produced from natural gas with carbon capture) comes out as the most cost-effective option by midcentury, but not before. 

"It is clear from this analysis that the LNG pathway to compliance offers massively lower fuel costs than that for both the methanol and ammonia pathways, particularly in the first 15 years of the vessel’s life – a period critical for vessel financing decisions. The methanol pathway is approximately 2.5 times more expensive and the ammonia pathway, 2.5 to 3.5 times more expensive," concluded SEA-LNG. 

Reducing methane slip

Most of the debate around LNG's climate effectiveness centers on methane emissions. Natural gas is mostly methane, a gas with substantially higher warming potential than CO2, and a percentage escapes during upstream extraction, transport and liquefaction. LNG-powered ships also emit varied amounts of methane during operation, with the amount dependent on engine type and operating profile. 

This last emissions category - methane slip - has captured the public debate for years, with some environmental groups arguing that it makes LNG an unattractive alternative. Though this debate gets headlines, it may soon be over. The industry's biggest players are quietly working to eliminate engine emissions of LNG by 2030, according to Steve Esau, SEA-LNG's chief operating officer. 

"There are a number of companies on the shipping side and the OEM side who are investing a significant amount of money to measure where the operational emissions are coming from on board ship, and then looking at solutions for addressing those," says Esau. "That would be a combination of operational solutions and pre- and post-combustion technologies to deal with methane slip. And I think they're very confident that methane slip will be eradicated by the end of the decade."

Adam Pankratz: Natural gas is the elephant in the room that Trudeau and Scholz are ignoring

Special to National Post - 

This week, German Chancellor Olaf Scholz is visiting Canada. Many items will be on his agenda with Prime Minister Justin Trudeau but one critical item is blatantly missing: liquified natural gas. Failure to discuss an LNG deal during this meeting is a further demonstration of a wanton and failing energy policy from both sides. The only question is, who is worse? The one whose country is currently paying €250 per megawatt hour for gas (more than 10 times what it was last year) or the one whose country is sitting on trillions of cubic meters of the stuff, yet can’t get it to market?


© Provided by National PostPipes at a natural gas plant near Fort St. John, B.C., Thursday, Oct. 11, 2018.

Canada’s proven gas reserves as of 2020 amounted to 2.4 trillion (yes, with a “T”) cubic meters of gas. That’s 83 trillion cubic feet if you prefer imperial. We also produce 165 billion cubic meters of gas annually, making us the fifth largest producer of gas in the world. Yet, despite our incredible reserves and large production we fail time and time again to get market value for our product.

Current price differentials in the LNG market boggle the mind. AECO, the Alberta or Canadian reference price, has fluctuated between $4 and $5 per gigajoule in recent months, most recently dropping below $2. They could even turn negative in September. Meanwhile, in the United States, the reference price of Henry Hub currently sits at a touch over $12 or US$9/MMBtu. While this differential may be enough to drive Canadian producers mad, it pales in comparison to what Europe is paying for gas with current prices over the equivalent of $90/MMBtu.

The reason for this differential blowout is simple: Canada lacks the infrastructure to get our gas to the world. With Canada’s LNG unable to be exported due to lack of pipelines and terminals our gas is held captive by our own domestic market. Our LNG should be transported all over the world to get the highest price but right now it remains largely trapped within our borders. Since Russia’s Ukraine invasion oil and gas prices worldwide have risen enormously. But in Europe, gas prices have soared more than anything else because of the lack of supply options other than Russia. Europe deserves heavy blame for their lack of gas substitutes and Europeans will suffer heavily this winter because of bad political judgement, particularly in Germany.

Canada may not have been able to affect European decision making but we do control our own destiny. Regardless, in past years, governments have shirked and ignored the huge LNG opportunity for enviro-political gain.

In British Columbia, there were multiple LNG projects proposed in recent years, but ultimately only one, with much delay and struggle — LNG Canada — has made it through the province’s byzantine regulatory and consultation process. Still not complete, LNG Canada will allow Canadian gas to access the world market for the first time, ever. On the East Coast there is no LNG export terminal, despite multiple attempts to build one. In February, Ottawa nixed Énergie Saguenay’s proposed LNG facility, which had been in the works since 2014. It was crushed just in time to watch Russia invade Ukraine two weeks later and use gas as an economic weapon.

We can bowdlerize with polite insinuations of a missed LNG opportunity, but the reality is that Canada’s performance on LNG has been short-sighted, ideological, unrealistic and foolish. There has been little concrete leadership by politicians who have more broadly preferred a starry-eyed, half baked approach to LNG policy discussions. Oil and gas are not disappearing anytime soon and it’s time Canadian policy started to reflect that reality.

Even those resistant to oil should be able to recognize that LNG is the next enormous economic opportunity for Canada. LNG is the bridge fuel which can replace coal, while producing at least 40 per cent fewer emissions than coal and about 25 per cent less than oil. This gives us a cleaner burning alternative as we transition (over decades) towards fully renewable energy. If there is a more economically and environmentally compelling argument in the world today, I have not seen it.

But there is also a moral and societal argument here in Canada as well. That argument is the huge economic opportunity LNG represents for First Nations communities in Canada, and particularly in British Columbia. LNG Canada and the Coastal Gas Link (CGL) will bring in billions of dollars in royalties and jobs to these communities. Multiple Indigenous leaders have spoken on the importance of this issue for their communities, including Crystal Smith of the Haisla Nation, Karen Ogen-Toews, CEO of the First Nations LNG Alliance, and Ellis Ross, Haisla member and MLA for Skeena.

LNG is here to stay as an important energy source for longer than many unrealistic politicians would like to admit. For over a century we have been using fossil fuels to grow and prosper; that will not change overnight. LNG will have a decades-long run ahead as a reliable, transition fuel. This is an opportunity Canada cannot miss. We must develop, in conjunction with indigenous communities, more pipelines, more gas wells and more LNG export terminals so that our precious resources find equitable prices in the growing world market. Any politician who can’t find space for an LNG discussion in their agenda today is woefully failing their citizens.

Adam Pankratz is a lecturer at the University of British Columbia’s Sauder School of Business and is on the board of directors of Rokmaster Resources.

ALL CAPITALI$M IS STATE CAPITALI$M

South Korea Expands Support for Shipbuilders as Challenges Grow

Ministers announced additional support during a visit to the HD Hyundai shipyard in Ulsan (file photo)

PUBLISHED MAY 10, 2023 3:22 PM BY THE MARITIME EXECUTIVE

 

The South Korean government announced a series of new initiatives planned to further support the domestic shipbuilding industry. Government officials cite the strong orderbook built over the past two years as the industry rebounded and leadership in what they term “high-value” ships while also recognizing the growing competition and need to develop new technologies.

Minister of Trade, Industry, and Energy, Lee Chang-yang outlined the plans to support the industry with further investments during a tour of the HD Hyundai Heavy Industries shipyard in Ulsan on Wednesday, May 10. Supported by the Ministry of Justice and the Financial Services Commission, he said the government would be expanding its investments to support the development of new technologies while also increasing the foreign worker programs and providing new financial support programs all designed to expand South Korea’s position in the industry.

Previously the government had launched programs to support research and development of advanced technologies including ammonia, hydrogen, and electric propulsion. They have also outlined programs to support training and recruitment to meet the long-term employment needs and address the current shortage of skilled workers.

The announcement of the new programs comes as the shipbuilding industry is under pressure as global orders have slowed since late 2022. Clarkson Research in its latest monthly update highlighted that April saw the lowest monthly level in three years, with just 80 ships (1.85 million compensated gross tons) ordered, a 62 percent decline over a year earlier and a 44 percent decline versus the previous month. South Korea’s shipyards received orders for only 13 ships, 20 percent of the market, while China grew its market share to 70 percent.

Minister Lee however highlighted that South Korean shipbuilders currently have orders for nearly 40 million tons or 35 percent of the order backlog. He pointed to the $9.4 billion in orders booked in the first three months of the year and a 12-year high of 38.68 million CGT in March, enough to “generate income for the next three years.” Korea won 70 percent of the high-value and green shipping orders in March, including 17 of the 19 LNG carriers ordered worldwide. The Minister expects the industry will generate $21.5 billion in exports this year alone.

"The world has a close eye on our shipbuilders' technology and manufacturing capability, and the business environment is changing favorable to us, with ship prices rising and more demand for environment-friendly vessels," Lee said during his presentation. "The government will spare no effort to support the industry's rebound and for market leadership in the future.”

To address the labor shortage, the government said that approximately 5,500 foreign workers had entered South Korea so far this year. They have already reached a third of the industry’s goal of 14,000 foreign workers this year with the government promising more efforts to simplify visa and labor regulations.

Other programs include investments of approximately $135 million for R&D of new technologies. The government looks to expand efforts in autonomous shipping and eco-friendly designs to continue the leadership in high-value shipbuilding. The Financial Services Commission is also expanding finance programs designed to extend more support to medium-sized shipbuilders. More state-run and commercial lenders will be involved to ensure more access to financing for the large and medium-sized shipbuilders as well as increase the guarantee rate for shipbuilders to protect from contacts terminated due to a builder’s default.

The ministers said the industry is coming back from years of an industry-wide recession but it will be critical to maintain South Korea’s competitive price, quality, and technological advantages.

Korea Commissions LNG Bunker Vessel with Domestic Containment System

Blue Whale employs a domestically designed containment system and tanks (Ministry photo)

PUBLISHED MAY 12, 2023 6:43 PM BY THE MARITIME EXECUTIVE

 

South Korea christened its new domestically designed and built liquified natural gas bunker vessel this week. The ship marks a milestone as it incorporates the country’s newly developed second-generation LNG containment system. The goal was to develop a domestic technology that will be competitive on the international market and provide a marketing advantage for Korean shipbuilders.

Christened the Blue Whale, the vessel has the capacity to provide 7,500 cubic meters of LNG fuel directly to vessels, which represents an advancement as it replaces up to 250 trucks required to deliver the same amount of LNG. The vessel was built in a project led by Korea LNG Bunkering which is a subsidiary of KOGAS, which in turn was selected by the Ministry of Trade, Industry and Energy in 2020. The government provided a subsidy of $11.7 million to support the development and construction of the bunker vessel with the new tank design and technology

The completion of the ship marks a 20-year effort by Korea to develop a domestic LNG containment system. Officials noted that while their shipyards continue to be a leader in the construction of LNG carriers, they and their competitors continue to license containment technology at a cost of up to $7.5 million per vessel. The goal of the project was to end Korean dependence on technologies from French giant GTT, the world’s leading company in the design and construction of LNG tanks and containment systems.

“We will be able to secure advanced, high-value homegrown cargo technology, as the Blue Whale will verify the KC-2 system for commercialization,” said Korea’s Ministry of Trade, Industry and Energy.

The new system is the second attempt by the South Koreans in a project that began in 2004 when Korea Gas Corporation in partnership with Daewoo Shipbuilding and Marine Engineering, Hyundai Heavy Industries, and Samsung Heavy Industries, began to jointly develop LNG tanks with support from the government.

The first product, the KC-1 LNG tank technology, took 10 years to develop and was adapted for use on four domestic ships, but structural defects caused gas leakages, and installation of the tank on carriers was halted. Based on lessons learned with the KC-1 membrane technology, the Korean government launched a second project in 2017 to upgrade the system to come up with the advanced KC-2 tank design.

The Blue Whale will be operated by Hyundai LNG Shipping after winning a bidding contest in January for the right to run the vessel. It will be employed for bunkering and will undergo a rigorous series of tests and demonstrations. Korea expects to commercialize the KC-2 technology to provide a new competitive advantage in the sector.

Korean shipyards continue to be the leader in shipbuilding for gas carriers although China has begun to compete for new orders. The Blue Whale was built by Hyundai Heavy Industries at the Ulsan Shipyard at a cost of $41.7 million. Hyundai Heavy Industries highlights that it has built a total of 100 LNG ships to date and that it currently has orders for 58 of the 155 LNG carriers to be built worldwide.
 

HMM Enters Bidding to Acquire Hyundai LNG Shipping

Hyundai LNG introduced Korea's first LNG carrier 30 years ago and became independent during Hyundai's liquidity crisis (Hyundai LNG Shipping)

PUBLISHED MAY 12, 2023 2:18 PM BY THE MARITIME EXECUTIVE

 

HMM has reportedly decided to enter the bidding to acquire its former LNG shipping operation that was spun off a decade ago during the company’s liquidity crisis. The Korea Herald is reporting on Friday that HMM notified IMM Holdings, owners of the gas carrier, of its intent to enter the bidding and to begin a due diligence process.

South Korea’s largest LNG carrier, Hyundai LNG Shipping was put up for sale by the investment company that has owned it since 2014. IMM reported its plans to sell the company it had acquired for a reported $375 million a decade ago opening the bidding process in March. Since then, an initial list of 20 potential buyers has reportedly been narrowed to four, with all of them being foreign companies. Media report said the potential buyers are located in the United States, the UK, Denmark, and Greece, with bidding expected to be completed later this month.

HMM reportedly had sought to buy the gas carrier at the end of 2022 but could not agree on a price and gain the support of its two large shareholders. IMM then placed the company up for sale, but recently there have been objections because of the critical role the company plays in the import of LNG to Korea. The shipping industry recently objected to the government over the possible foreign sale of Hyundai LNG Shipping. Reports said that the government is also considering the ramifications of a foreign sale and looking to possibly block it on the grounds of national security.

HMM is also currently beginning a process to be privatized by its owners Korea Development Bank and the Korea Ocean Business Corporation, both government institutions that had become the largest shareholders during a financial rescue of the company then known as Hyundai Merchant Marine. The banks recently named a group of advisors to structure the sale process for HMM. It is expected that they might launch bidding later this year for the carrier.

The company which is today primarily a container carrier had previously reported its strategy was to grow its operations including in bulk shipping. In July 2022, HMM detailed a five-year strategy calling for $11.4 billion in investments that would double its container capacity. They also said investments would be made to increase the bulk fleet, which includes 10 VLCC crude oil tankers as well as one Suezmax, two chemical tankers, and one LNG carrier. HMM also has a fleet of dry bulkers for iron ore and coal transport.

Hyundai LNG Shipping reports it launched Korea’s first LNG carrier in 1994. After the IMM acquisition in 2014, they won a transportation contract with KOGAS and more recently began expanding the fleet including with LPG carriers. Earlier this year they took delivery on three VLGCs built by Hyundai Samho Heavy Industries with two more due for delivery later this year.  The total fleet will consist of 16 LNG carriers and six LPG carriers. They also recently launched Korea’s first LNG bunker vessel.

The Korea JoongAng Daily is reporting that the bidding process for Hyundai LNG Shipping will now be delayed to permit HMM to enter a proposal. IMM had previously said it had not received a reasonable financial offer from a Korean company but that it is not opposed to selling the company to Korean investors at a fair price.
 

Europe's Liquefied Natural Gas Buildout Collides With Waning Demand

Yale Environment 360
Wed, November 1, 2023 

A liquefied natural gas import terminal near Porto Levante, Italy.

 MARCO SABADIN / AFP VIA GETTY IMAGES

As part of its efforts to wean itself off Russian energy, Europe has sought to import more natural gas from overseas, erecting new terminals for processing deliveries of liquefied natural gas. But this new capacity is set to far exceed demand, an analysis finds.

With war roiling energy markets, Europe has aimed to swap gas delivered by Russian pipeline for liquefied natural gas (LNG) delivered by ship, largely from the U.S. and Qatar. From the beginning of last year, Europe has added six new LNG terminals, expanded an existing terminal, and restored a dormant terminal.

But much of that new infrastructure may prove unnecessary as European gas consumption declines, according to the Institute for Energy Economics and Financial Analysis. Europe’s recent efforts to build out renewables and curb gas consumption are paying off. After a surge in imported LNG in 2022, it has seen imports flatten out this year.

IEEFA


With new LNG infrastructure still coming online, the analysis found, Europe will be able to import 406 billion cubic meters of natural gas by 2030, slightly more than the 400 billion cubic meters of natural gas it is projected to consume in total.

“The decline in gas demand is challenging the narrative that Europe needs more LNG infrastructure to reach its energy security goals,” said analyst Ana Maria Jaller-Makarewicz. “The data is showing that we don’t.”

Experts have warned that new LNG infrastructure could incentivize future consumption of natural gas even as countries must cut fossil fuel use to avert dangerous climate change. A new report from the International Energy Agency finds that the global buildout of LNG infrastructure threatens to create a supply glut, which could cause prices to crater later this decade.

Chevron in talks on 15-year LNG supply contracts into Europe

Thu, November 2, 2023 

FILE PHOTO: Illustration shows Chevron logo and natural gas pipeline


By Ron Bousso

LONDON (Reuters) - Chevron is negotiating contracts to supply liquefied natural gas (LNG) into Europe for up to 15 years as buyers expect the region to rely on imports for longer than previously thought, an executive at the U.S. oil and gas company said.

The new willingness by buyers to agree on long-term supply deals comes after several European governments rolled back some green policies citing higher costs and economic concerns.

European imports of the super-chilled fuel surged after Russia halted pipeline gas exports in the wake of Moscow's invasion of Ukraine last year.

Buyers initially sought short-term LNG supply of up to 5 years due to the uncertainty in the market and countries' ambitions to reduce their reliance on fossil fuels.

But that has changed as the focus on securing energy supplies grew, Colin Parfitt, head of Chevron's trading, shipping and pipeline operations, told Reuters on Wednesday.

"There's been an evolution over the past 18 months from short-term and spot supply deals to longer term commitment," Parfitt said.

"After Russia-Ukraine, the initial thoughts we were getting out of Europe were 'we only want LNG for a short period of time because of the energy transition'. What I've seen happening in the last year is that lengths of contracts customers are willing to sign have been extended," Parfitt said.

"European customers want medium-term deals in the up to 15 years space and we're working on some commercial deals."

Last month, Shell and TotalEnergies agreed on two separate 27-year LNG supply deals into Europe with Qatar, one of the world's top producers.

Chevron will supply most of the LNG from the United States, which has become a major LNG exporter following the shale boom in recent years.

U.S. LNG exports hit their second highest level on record in October, with Europe remaining the principal buyer.

In the short term, Parfitt said the European market looked well supplied ahead of winter.

"In the short term European gas looks well supplied, softer than last year but with risk of volatility if you get a cold winter in Europe, cold winter in Asia, risks to supply as well as geopolitics."

(Reporting by Ron Bousso; Editing by Emelia Sithole-Matarise)

New Fortress Energy may need to reapply for Mexico LNG permit -US

Wed, November 1, 2023 


By Curtis Williams

HOUSTON (Reuters) - The U.S. Department of Energy (DOE) has warned New Fortress Energy if any portion of its Altamira floating liquefied natural gas (LNG) project is located onshore Mexico, the company will have to resubmit its application for an export permit.

New Fortress's $1.3 billion Altamira LNG project was expected to start shipping the superchilled gas this month under an export permit issued in June. If the company must reapply for a U.S. export permit, it could further delay the two-phase project.

New Fortress did not immediately reply to a request for comment submitted through its website.

The company has received a U.S. license to export Altamira's LNG to Free Trade Agreement (FTA) countries, but not the larger set of non-FTA countries. New Fortress has proposed many LNG projects that use converted offshore oil production rigs to support LNG processing.

Altamira was originally designed with two facilities - Fast LNG1 on converted oil platforms and Fast LNG2 on three fixed platforms. The entire project is set to be Mexico's first producing and exporting LNG facility. It would use U.S.-sourced gas, the DOE wrote.

"If the project site and design have been modified such that FLNG2 will be located onshore in Mexico instead of offshore, NFE Altamira is required ...to request an amendment of its FTA order," the department wrote on Oct. 30.

The DOE's letter pointed to a corporate press release and an Oct. 16 securities filing that suggested the project was a hybrid, with FLNG1 located offshore and FLNG2 set onshore.

The configuration requires clarification, the DOE added, since it might not meet the terms of the export license that governs both parts.

In June, Mexico's government granted NFE a permit to export up to 7.8 million metric tons through April 2028.

Its existing U.S. FTA authorization allowed it to supply LNG to Mexico and other countries with free trade pacts. The project awaits a decision on its application for a non-FTA export permit.

(Reporting by Curtis Williams in Houston; Editing by Josie Kao)

WHAT ABOUT USING DAM C?

Exclusive-Electricity constraints force Canada's first LNG terminal to delay renewable shift

Mon, January 16, 2023 
By Rod Nickel and Nia Williams

(Reuters) -Shell PLC's LNG Canada export project in British Columbia plans to start building its proposed second phase with natural gas-powered turbines and switch to electricity as more renewable power becomes available, a top executive said, a decision that means the expansion project will initially generate high greenhouse gas emissions.

LNG Canada, in which Japan's Mitsubishi Corp owns a 15% stake, is set to be Canada's first liquefied natural gas (LNG) export terminal. The first phase is expected begin shipments around 2025.

With global demand for natural gas from sources other than Russia accelerating after its invasion of Ukraine last year, LNG Canada is weighing whether to build by 2030 a second phase to double annual capacity to 28 million tonnes.

LNG Canada now plans to initially build Phase 2 with natural gas-powered turbines and switch to electric motors as more power becomes available, pending a final investment decision, CEO Jason Klein told Reuters on Friday.

LNG Canada has previously described this approach as only one of the options it was considering.

The company's move to only gradually switch to renewable electricity risks means the Phase 2 project would produce initially high emissions that would run up against ambitious emissions reduction goals set by the British Columbia and federal governments.

Running the turbines using B.C.'s hydro electricity to cool the gas to liquid for shipping would limit emissions, but requires hundreds of kilometers of new transmission lines to reach the province's remote northwest coast.

"We can't do an immediate and wholesale electrification of the plant and the pipeline. It's not possible today because the transmission infrastructure just isn't there," Klein said, adding that LNG Canada is discussing with both governments and utility BC Hydro when lines may be in place.

"If the power was there today it would be a pretty straightforward decision."

LNG Canada's dilemma illustrates the practical challenges of a global push to electrify buildings and vehicles to curb climate-warming emissions. The move requires the world's grid to generate significantly more power and build infrastructure to deliver it.

Klein said LNG Canada had not directly asked for financial assistance from either government to build transmission lines and electrify Phase 2, and is still assessing the project's economics.

"I wouldn't expect to be able to attract capital to a project that's not competitive," Klein said.

LNG Canada has full environmental permits from both governments to use natural gas turbines for Phase 2, making it unclear what leverage governments have to force electrification.

Government cooperation is critical to constructing transmission lines, however.

"It would be difficult to make an investment on this scale without some level of alignment and the support of host governments," Klein said.

CLIMATE GOALS

Russia's invasion of Ukraine upended gas deliveries to Europe, prompting a scramble for alternative supplies. Some of Canada's allies, including Germany and Japan, have asked Prime Minister Justin Trudeau to play a major role in increasing LNG supplies.

Ottawa wants to develop a Canadian LNG industry to boost the economy, but has also pledged to cut emissions by at least 40% by 2030.

The terminal, which LNG Canada says would have the lowest emissions intensity in the world, will emit 4 million tonnes of greenhouse gases annually with both phases based on natural gas power. That's the equivalent of 0.6% of Canada's total 2020 emissions.

Electrifying Phase 2 is expected to be more expensive than using natural gas. But buyers may pay more for LNG produced with lower emissions, Klein said, noting that some buyers already purchase carbon offsets for LNG cargoes.

He said he is satisfied the province of B.C. can generate enough electricity for the terminal - the issue is how quickly it can build new transmission lines and how that would impact Phase 2 costs.

Mora Scott, a BC Hydro spokesperson, said the utility expects to have more than enough power until the end of the decade and is planning for scenarios including rapid growth from mining and LNG development.

Future LNG projects need to fit within B.C.'s climate goals, the province's ministry of energy said in a statement, while federal Environment Minister Steven Guilbeault said it was up to B.C. to decide what to do with its electricity.

LNG production accounts for only 15% of the greenhouse gases associated with it, and the rest enters the atmosphere when consumers burn the gas, suggesting the governments' emphasis on electrification of the terminal is misplaced, said Bruce Robertson, an analyst at the Institute for Energy Economics and Financial Analysis, an independent energy research group.

"This is a classic example of how perverse carbon accounting is," he said. "The LNG industry in Canada is conveniently excluding where most of the emissions occur."

(Reporting by Rod Nickel in Winnipeg and Nia Williams in British Columbia, additional reporting by Allison Lampert in Montreal, editing by Denny Thomas and Deepa Babington)

B.C. First Nation and partners propose new $10B LNG megaproject
Kyle Bakx 

© Nisga’a Lisims Government Construction of the Ksi Lisims liquified natural gas facility could begin in 2024. The proposed site is located at Wil Milit, approximately 15 kilometres northwest of Gingolx, a B.C. coastal community about 80 kilometres north of…

A First Nation in British Columbia is proposing a new liquified natural gas (LNG) export facility to be built on the community's treaty land and is making an environmental pledge to reach net-zero emissions within three years of commencing operations.

The Nisga'a Nation, whose territory is north of Prince Rupert near the Alaska border, is partnering with a group of Western Canadian natural gas producers called Rockies LNG Partners and a Texas-based energy company called Western LNG.

The project is called Ksi Lisims LNG and would include a pipeline to transport natural gas from the northeast corner of the province to the coast. The facility itself is estimated to cost $10 billion.

The chilled natural gas would be loaded onto ships and exported to Asia.

The project proponents are scheduled to announce the project on Monday, and will begin applying for the necessary government permits and start formal talks with communities in the region.

The project will undergo an environmental assessment as part of a joint-regulatory review by the federal, provincial and Nisga'a governments.

In 2000, the Nisga'a and the governments of Canada and B.C. signed a treaty that gave the Nisga'a control over about 2,000 square kilometres of territory in the Nass Valley in B.C.'s northwest.

© CBC News The proposed site for the Ksi Lisims LNG project.

"We want to bring sustainable economic activity, not only to the Nass Valley but to the region. It's going to also assist in helping to fight poverty and to bring a prosperous future," said Nisga'a Nation President Eva Clayton, in an interview.

The project comes at a time when many other LNG proposals for B.C.'s coast have either been shelved or cancelled.

Asian prices for LNG are at multi-year highs as global demand for natural gas is robust to meet the power generation needs of many countries this summer.
Negotiations for pipeline construction

Ownership of Ksi Lisims LNG is still being determined as the proponents continue to finalize commercial agreements.

The economic impact of Ksi Lisims LNG is estimated to be $55-billion including the facility, pipeline and the production of natural gas over 30 years.

"It is a big project. It's a lot of money. But will the economics be there for it in the long run?" said Martin King, a natural gas analyst with RBN Energy.

"That's the ultimate arbiter of everything that happens in building these projects — will it meet economic thresholds?"

Ksi Lisims LNG is negotiating with two companies to build a pipeline.

Enbridge's Westcoast Connector Gas Transmission project and TC Energy's Prince Rupert Gas Transmission project both already have environmental approvals in place as they were meant to transport natural gas for now-cancelled LNG export projects in the Prince Rupert area.
Net-zero goal

Company officials say the LNG facility could be operational in late-2027 or 2028 and reach net zero emissions within three years of startup through the use of hydroelectricity, energy efficiency, carbon offsets and potential carbon capture and storage.

Net-zero emissions mean that any emissions of greenhouse gases produced are offset by other measures.

"The nation is very much concerned with the ever-changing climate," said Clayton. "We want to be able to assist with providing low-carbon energy."

The floating liquefaction facility would be located near the village of Gingolx, a coastal community about 80 kilometres north of Prince Rupert. The project will be capable of producing 12 million tonnes of LNG per year and generate 4,000 construction jobs.

The facility would be nearly the same size as the first phase of the LNG Canada project, which is led by Shell Canada and is now under construction near Kitimat. The initial phase would be able to export 14 million tonnes of natural gas.

A much smaller project near Squamish, Woodfibre LNG, is expected to reach a final investment decision later this year on its proposed facility, which will produce 2.1 million tonnes of LNG per year.

Last month, the Haisla Nation announced a partnership with Pembina Pipeline on a three-million-tonnes planned project near Kitimat called Cedar LNG.

No matter the project, some environmental leaders say natural gas projects may struggle to compete financially with renewable sources of energy, since the cost of wind and solar electricity has fallen considerably in recent years.

Critics also say hydrogen is emerging as a competing source of energy to the LNG industry.

"The long-term future isn't LNG, it's cleaner fuels," said Merran Smith, executive director of Clean Energy Canada.

There’s a place for B.C.’s gas in a net-zero future. But not for long

Story by The Canadian Press • 

In 2020, Susannah Pierce, a senior fossil fuel executive from Shell, offered a rosy outlook for a highly anticipated west coast gas liquefaction and export facility.

Speaking on a podcast produced by an oilpatch lobby group, she said LNG Canada would usher in an era of jobs and Indigenous prosperity for decades to come.

“We are a new project with a long lifeline,” she said at the time. “I think [it’s] a very positive shift to the extent to which many of these Indigenous communities have an opportunity and they have the control over that opportunity that they’ve never had before.”

Pierce stressed the value of the project in terms of creating jobs for northern communities that “suffered through the ups and downs of the mining sector, the forestry sector.”

“Here’s a new opportunity,” she said. “An opportunity for 40 years.”

But as countries around the world commit to ambitious emissions reductions and global gas markets react to unforeseen events, a new federal report suggests the long-term outlook of the Kitimat, B.C., project is up in the air.


The Canada Energy Regulator released the report in late June. It offers an analysis of the country’s energy future in three scenarios: business as usual, Canada achieving its climate goals and a world in which countries around the globe reach net-zero emissions targets by 2050. According to the latter two scenarios, B.C.’s burgeoning liquefied natural gas (LNG) export industry isn’t facing imminent collapse — but it doesn’t have the “long lifeline” Pierce promised.

That shouldn’t be surprising, said Jean-Denis Charlebois, the regulator’s chief economist. On a call with The Narwhal, he explained the analysis was informed by a “predetermined outcome” in which global climate commitments are achieved.

“Exports start in the late 2020s and keep going until the mid 2040s, at which point the global price declines so much that only projects that are electrified … can be cost competitive on a global basis,” Charlebois said. “The projects that are not electrified then have costs to manage emissions from their operations [which] bites into the value that they extract for shareholders.”

He said companies in a net-zero world need to be prepared to operate in a “low price environment.”

“Because if not the case, then it makes no sense to actually either build or continue to operate.”

Charlebois stressed the new analysis of the impacts of net-zero scenarios on the oil and gas sector shouldn’t be taken as an oracle.

“Ultimately, it’s not a prediction of what will happen,” he said. “It’s actually one and two scenarios that we think are possible but we haven’t gone into the analysis of looking at how likely any of those are.”

LNG Canada — which is owned by a group of foreign companies including Shell, Petronas and PetroChina — is working towards being the first large-scale facility to ship liquefied gas from B.C. to buyers in Asia. When its first phase comes online around 2025, it plans to power its energy-intensive operations by burning some of the 2.1 billion cubic feet of gas it would receive daily from the Coastal GasLink pipeline. A second phase would double production — and correspondingly double the amount of gas it burns domestically. For context, one year’s supply of gas at 2.1 billion cubic feet per day can generate enough power to keep the lights on and living rooms warm in nearly 10 million homes.

The consortium dismissed The Narwhal’s questions about the regulator’s scenarios, suggesting the project remains viable.

“A joint venture of five global energy companies with substantial experience in natural gas and liquefied natural gas, LNG Canada is a 40-year asset designed to be the world’s lowest carbon producing LNG facility of its size,” a spokesperson wrote in an email to The Narwhal.

Electrification isn’t off the table for LNG Canada but it’s far from a sure thing, and questions remain about whether B.C. can generate enough power to support the industry while meeting increasing demand from other sectors, such as transportation.

According to the regulator’s global net-zero scenario, gas production in Canada peaks this year, holds until 2026, then steadily drops, with LNG Canada and Squamish-based Woodfibre LNG exporting until around 2044, at which point the market drops out.

Under this scenario, LNG Canada would only support jobs for 20 years or less.

It was a different time and cooler climate when the B.C. government hedged its bets on the LNG export industry, wooing international fossil fuel giants like Malaysia’s state-owned Petronas, Shell and others to the province. In the early 2010s, a flurry of proposed projects popped up in places like Prince Rupert, Kitimat, Vancouver and Squamish. Back then, LNG was touted as an economic saviour and a climate champion. More than a decade later, things have changed — in B.C. and around the world.

The impacts of climate change are intensifying and the world is hurtling towards surpassing 1.5 C of warming above pre-industrialization levels, a point the Intergovernmental Panel on Climate Change has warned will “intensify multiple and concurrent hazards” with a disproportionate impact on Indigenous Peoples worldwide. Canada is currently experiencing its worst wildfire season in history, with smoke from millions of acres of burning forests blanketing major cities like Toronto and New York and wafting across the Atlantic Ocean.

The scientific consensus is “human activities, principally through emissions of greenhouse gases, have unequivocally caused global warming.” Most of those emissions are a product of getting fossil fuels — like gas — out of the ground and burning them to produce energy. To set a path for “deep, rapid and sustained [emissions] reductions” as recommended by the international panel, governments around the globe are committing to aggressive decarbonization policies. Many, including Canada, have set a mid-century deadline. The goal is net-zero emissions across all sectors.

Industry groups, proponents and supporters of the sector maintain an argument that LNG produced in Canada is a lesser of evils and a means to wean countries off of other fossil fuels. The idea is Canada has tighter environmental and emissions regulations than, say, jurisdictions like Qatar. In B.C., the provincial energy regulator is strengthening methane regulations and if dreams of electrification — including upstream, transport and liquefaction — are realized, the overall carbon footprint of burning the gas for energy is reduced.

“We believe LNG, especially highly competitive Canadian LNG, has a significant place in the transition to a net-zero world, now and in the long term,” the LNG Canada spokesperson wrote. “LNG Canada will continue to support global LNG supply as global demand evolves.”

“It’s really good rhetoric. It sounds good but I don’t think it lines up,” Tom Green, senior climate policy advisor with the David Suzuki Foundation, told The Narwhal in an interview. “Even if you deal with all the upstream methane emissions, it’s still fossil fuel that you’re burning. It’s adding to total emissions in the atmosphere and it’s helping displace investments in renewables in receiving countries.”

By that he means locking in projects to export LNG only diverts or delays potential investment in alternative ways of producing energy, such as wind, solar, hydro and nuclear.

“We hear this with oil, that Canadian oil is ethical oil,” he said. “It’s almost as if we mix a little bit of maple syrup with it and then we say there’s this special Canadian flavour. But with LNG and oil and whatnot, it’s not like wine — it’s not like people want a certain vintage. Yeah, carbon intensity matters but ultimately price is what drives it.”

LNG Canada did not respond to The Narwhal’s follow-up questions prior to publication.

Under the scenarios developed by the federal regulator, global economics are the lynchpin for how and when declines in B.C.’s gas sector will play out.

“Producers are highly influenced by the price of natural gas worldwide,” Charlebois said. “In the two net-zero scenarios, we used the global price of the International Energy Agency, which sees a downward trend pretty significantly through the projection period.”

Marla Orenstein, natural resources director with Canada West Foundation, a policy think-tank based in Calgary, Alta., said she’s not sure the federal regulator’s numbers hold up in the real world.

“I’m not convinced … that those estimates of what demand would be for Canadian LNG are accurate,” she told The Narwhal in an interview. “There’s a sort of bifurcation of response from different countries to LNG, depending on where they are economically.”

She said when Russia invaded Ukraine, prompting a European energy crisis as gas supplies were suddenly cut off, it prompted a wide conversation about energy security. Countries like Japan and Germany want a “secure supply from a diverse group of suppliers,” she said.

But the International Energy Agency and others, such as British multinational oil and gas giant, BP, say the war is spurring calls for greener energy.

In BP’s 2023 energy outlook, Spencer Dale, the company’s chief economist, said the repercussions of Russia’s actions are “likely to accelerate the pace of the energy transition.” He noted countries are looking to “bolster their energy security by reducing their dependency on imported energy — dominated by fossil fuels — and instead have access to more domestically produced energy — much of which is likely to come from renewables and other non-fossil energy sources.”

The Canadian Association of Petroleum Producers declined an interview request but told The Narwhal in a written statement the impacts of world events, such as the COVID-19 pandemic and the conflict in eastern Europe, “can rapidly alter the trajectories of energy trade and production.”

“What we know today is global demand for oil and natural gas is rising and Canada has an important role to play in ensuring a secure supply of reliable energy is available to Canadians as well as our trading partners and allies around the world,” Lisa Baiton, president of the industry group, told The Narwhal in an email.

Baiton did not provide any specific comments about the implications of the net-zero scenarios, saying only that it is “important to look at long-term scenarios and consider a range of credible sources to inform pragmatic pathways with the goal of lowering emissions and protecting our economic prosperity.”

Under the “current measures” scenario, where Canada and other countries fail to meet climate targets, LNG exports steadily increase over the coming decades, with production rising to 21 billion cubic feet per day.

In all three scenarios, the regulator said most of Canada’s gas will be extracted from vast underground shale deposits in northeast B.C. But access to the gas is constrained by agreements between the provincial government and some Treaty 8 nations. Following a historic B.C. Supreme Court win in 2021, Blueberry River First Nations signed an agreement with B.C. that, among many other things, restricts new oil and gas development on the 38,300-square-kilometre territory.

The federal analysis did not examine potential implications of the agreements but it flagged uncertainties, noting a rapid decline in LNG exports could come sooner than 2044 or they could continue past 2050. “Small changes to economics can alter which projects are built and when, or when projects might shut down,” the report’s authors wrote.

The International Institute for Sustainable Development recently warned Canada should not wait for global markets to dictate whether fossil fuel projects proceed or when they start winding down operations.

“If oil and gas infrastructure and investments are rendered uneconomic — that is, are stranded — by falling demand, the effects will go beyond the people employed in the sector to risk the destruction of a vast amount of national wealth, to the detriment of all Canadians,” the institute wrote in a recent report on managing the decline of domestic oil and gas production.

Green, with the David Suzuki Foundation, also worries about what would happen if the market drops out, rendering LNG Canada, Coastal GasLink and other developments uneconomical.

“My fear for the Indigenous nations in B.C.’s north is that there’s quite a risk of stranding assets on peoples’ territories,” he said. “And then there’ll be no money to decommission them.”

In the short term, at least, buyers appear to be lined up. Orenstein said the ambassadors of South Korea and Japan — two countries B.C. Premier David Eby visited in early June — gave introductory statements at a recent webinar presented by Canada West Foundation. She said those ambassadors told attendees their countries are ready and waiting.

“They want this stuff. If we can produce it, they will gobble it up.”

Under the federal regulator’s global net-zero scenario, demand for electricity skyrockets as oil and gas production tapers off.

“When we model the electricity demand for B.C., there is this incredible growth — 84 per cent from what we see today,” Charlebois said, noting the spike in demand modelled by the regulator includes electrifying LNG Canada’s first phase. Electrifying other facilities is outside of the scope of the scenarios, he added.

“Either more electricity would need to be produced — and at the margin what we see is a lot more wind, solar energy and also small modular reactors relying on nuclear energy,” he said. “If that cannot occur, then something else needs to give. It’s not for us to arbitrate what gives, but it’s rather to provide those two pathways for Canada to inform a conversation.”

The regulator’s analysis did not include a number of projects on the books in B.C. In the lower mainland, Fortis BC is working on plans to expand its Tilbury LNG facility. A few kilometres from where the LNG Canada facility is being built in Kitimat is Cedar LNG, a Haisla-led export project. Recently approved by the B.C. government, the liquefaction plant plans to use electricity supplied by BC Hydro to power its operations. And on nearby Nisga’a territory, a proposed floating liquefaction and export facility called Ksi Lisims is currently undergoing environmental assessment. It, too, is banking on a steady supply of electricity.

According to a recent Pembina Institute report, B.C. is facing an electricity shortfall if it powers the LNG sector with hydro.

“If only LNG Canada and Woodfibre LNG proceed, about 13 [terawatt-hours] of additional electricity will be required to electrify the terminal and upstream processes,” the report noted. “This is 2.5 times greater than what is generated by B.C.’s Site C hydroelectric dam.”

There are also a trio of pipelines previously approved by the B.C. government to transport gas to the Pacific coast.

Enbridge, which owns two of those pipelines and has a 30-per-cent stake in Woodfibre LNG, said it is diversifying its energy portfolio, including investing in wind, hydrogen-blending projects and ammonia production, and didn’t appear to be concerned about the future of its pipeline projects.

“In 2022, we announced our investment in Woodfibre LNG, and believe expanding global access to natural gas through liquefied natural gas (LNG) is a key part of reducing global emissions,” a spokesperson wrote in an email to The Narwhal. “To that end, we have two proposed natural gas transmission projects in B.C. that could support future LNG development. The Westcoast Gas Transmission Connector and Pacific Trail Pipeline could be used to provide natural gas to Asian markets and displace more carbon intensive forms of energy.”

But Enbridge’s bottom line will ultimately decide what happens. Whether or not those pipelines will be built hinges on what happens with global gas prices.

Green noted context is important to keep in mind. He said the regulator’s global net-zero scenario is one “where the world acts to avoid an even worse climate outcome than what we are already experiencing.”

“It shows that anything beyond [the first phase of] LNG Canada is an increasingly dubious prospect and such projects are at high risk of stranding before they break even,” he said. He added LNG Canada required “generous public financing, infrastructure provision and other concessions” to be economically viable.

“We built this plant and assumed it would be good for 40 years,” he said. “The world has shifted so fundamentally … from when the assumptions around LNG Canada were made, the assumptions that it was going to bring all these jobs and riches to the province. I just don’t think they’re going to materialize.”

Matt Simmons, Local Journalism Initiative Reporter, The Narwhal