The LNG Opportunity in BC:
Separating
Rhetoric from Reality - Part I
By Tom Syer and Jock Finlayson
Editor’s note: In a two-part feature published
in the Business Council of British Columbia’s
Environment and Energy Bulletin, the validity of
the arguments suggesting that BC should put the
brakes on LNG development are assessed.
Part I (Volume 6, Issue 3, June 2014) focuses
on the economic concerns related to LNG
development in BC; chief among these concerns:
the highly competitive Asian market, and the
possibility that the price spread supporting the
LNG opportunity in BC could easily disappear.
Part II (Volume 6, Issue 4, July 2014) focuses
on concerns about climate change and other
environmental impacts linked to LNG. Here’s an
abridged version of Part I, published with the
authors’ permission.
LNG Economics
I
n the BC context, the scale of market activity in the LNG
sector is remarkable. It is clear that the potential for
private sector LNG capital deployment is unprecedented
in BC’s history.
To summarize the activity briefly, BC (and Alberta) have
world-class upstream natural gas resources – estimated
page 6
|
I N D U S T R Y U P D AT E
in excess of 500 trillion cubic metres of reserves – making
Canada the fifth largest gas producer in the
world. To date, these natural gas resources have been
well developed by a cluster of companies that are global
leaders in shale gas development. Combined with BC’s
institutional/regulatory stability, close proximity to Asia,
and the existence of a significant price differential between
Asian and North American natural gas markets, BC’s resource
abundance has prompted as many as 13 proposed LNG
projects – over half of which are led by major global
energy companies on both the supply and demand sides.
These proposed projects each represent capital
deployments valued between $1-2 billion for the smaller
projects and up to $20+ billion for the larger LNG facilities.
When incremental midstream and upstream activity is
added in, the total private sector capital deployment for a
large LNG project will exceed $36+ billion.1
Private Sector Investment Activity
Actual expenditures – dollars spent by proponents on
regulatory work, front-end engineering and design, labour
and supply chain activity, and partnership development –
are already in evidence. We estimate that the cluster of LNG