Competition, Capital, and People (cont’d)
taken strides to shutter all of its nuclear plants, we’ve seen a
significant increase in German coal-fired power generation
– in part made possible by access to relatively inexpensive
(certainly compared to LNG cargos) US coal supplies that
have been pushed out of the US because of regulatory and
market pressures.
While much of the current demand for LNG originates from
Japan and Korea, it may be China that represents the largest
potential buyer of future LNG. The Chinese government has
already declared its desire to significantly ramp up its use of
natural gas and reduce its overreliance on coal, which has
caused very significant air quality concerns. In time, China
expects to feed significant demand with its own shale gas
resources but until that resource is developed, it is likely that
Chinese demand for LNG will grow. Demand for natural gas
in China could reach as much as 43 bcf/d [billion cubic feet
per day] by 2030.
Russian pipelines to China, LNG opportunities from
Mozambique, and buyers’ efforts to break the long-standing
oil-indexed-linked pricing mechanism also contribute to
fierce competition at the global level.
Canada’s Advantages
egulatory and market support for exports
R
•
P
• rojects led by global players (operators,
customers)
C
projects
• ost advantages vs. competing costs)
(all-in transportation, operating
P
• articipants hold equity interests in gas
S
• table legal and fiscal business
environment
S
• killed local labour market in Western
Canada
page 10
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I N D U S T R Y U P D AT E
Capital Allocation
The capital agenda continues to dominate discussion at
the C-Suite and boardroom tables of the world’s leading
oil and gas companies. Important strategic decisions
around where, when, and how to raise, invest, preserve,
and optimize capital have become increasingly challenging
as companies struggle to achieve satisfactory returns and
effectively manage risk.
Canadian LNG projects will have to compete globally
for capital against projects in many jurisdictions. For
example, the significant capital requirements for pipelines,
infrastructure, liquefaction facilities, and development of
the required natural gas reserves for Canadian projects will
have to compete with brownfield projects in the US where
a far more developed infrastructure capable of supporting
LNG exports already exists.
For participants looking to grab some share of the multibillion dollar spend that will be needed to advance the BC
LNG projects, the dynamics of this capital allocation process
and the global organizations that are behind the projects
add to the complexity. Where are the decisions being
Canada’s Disadvantages
I
nfrastructure required (facilities, pipelines,
production, and civil)
•
C
• ost pressures (project construction,
people shortages)
G
• lobal competition
E
• volving pricing arrangements (oil price
de-linking)
C
• omplex First Nations dynamics
C
uncertainty
• ontinuingfiscal regimesregarding
applicable