While there may be nine liquefied natural gas export projects proposed for the northwest, the BG Group’s vice-president of global LNG expects only a fraction of the terminals will actually come to fruition.
“Our modelling shows three projects in Canada and they may not come on in the time frame imagined by your government. I think that is a realistic projection … by 2025 there will likely be one to three projects in this region with two to three trains each,” said Dr. Andrew Walker during a presentation to Prince Rupert city council on Feb. 24, noting time is a factor.
“For Asian markets, reliability and security of supply are key. They get weary if they don’t feel projects are being supported or are stalling because they are dependent on looking forward and planning their market … when they look at the project they want to buy from, they look at the credibility of the proposer, local government support and community support. They become weary of committing to those types of projects [that are being delayed] and they do have options at the moment.”
Speaking on the current condition of the market, Walker projects demand for LNG to grow at 2.4 per cent per year compounding through to 2025, resulting in an export increase from 240 million tonnes per year to 420 million tonnes per year. While other countries, including Australia and the United States, are rushing to create new export capacity, Walker said that may not be enough.
“If you look at what is currently developed, mostly in Australia, a supply and demand gap begins to show around 2018 and grows so that by 2025 industry consensus is there needs to be another 150 million tonnes of supply in place over and above what is currently under construction,” he said.
“In our view there is additional demand if additional supply is put in place to meet that demand. We, as a company, tend to see supply being a constraint, rather than demand.”
There are currently 17 countries exporting LNG into 27 importing companies. Although some speculate the expansion of LNG exports will create a buyers market for Asian customers, Walker said the BG Group doesn’t see it that way.
“We feel the buyers are going to take a view that they want to take a diversified set of supplies. They won’t want to buy all of their demand from the U.S., they’re going to buy some from the U.S and some from other locations such as Canada and such as East Africa,” he said.
“What really decides how many projects go ahead and which ones go ahead are the buyers. The buyers
will pick which projects happen – people won’t build these projects speculatively, they’ll only build them if they have buyers.”
The BG Group is hoping to make a final investment decision on its Ridley Island Terminal in 2016 to begin operation in 2020 or 2021, and told council they can help by championing the project when possible.
“These are projects that need a push to get them into existence. Getting the stakeholder alignment is key – if it doesn’t work for you then it doesn’t work for us, but if it doesn’t work for us then it doesn’t work for you. We’re in this together,” he said.
“What do we expect from the City of Prince Rupert? It’s really your circle of influence so that you can help us and we can help you in terms of local government alignment … we would see you taking the lead on that.”