Competition,
Capital, and People
Excerpted from “Competing in the global LNG market: Evolving Canada’s
opportunity into reality,” a paper by EY’s Canadian Oil & Gas practice.
See the complete report at ey.com/ca/lng.
Canada’s Global Competitors
Canada’s extensive reserves, stable and reputable political
environment, and transportation cost advantages won’t
be enough to attract the attention of investors and
secure long-term supply contracts in today’s competitive
LNG market. Capital will always flow to the most
economically viable project.
Global powerhouses, including Australia and Qatar, remain
dominant threats to Canada’s LNG potential, although many
face political and geographic challenges. Emerging supply
markets such as East Africa and Russia currently operate
below the radar, but could become future competitive threats
if their projects get off the ground.
And, closer to home, the US continues to increase its focus
on the sector. Seven projects have already received approval
in the US, and the Cheniere Energy Inc. project is scheduled
to produce its first cargo by late 2015.
Where does Canada stand against US exports? Many argue
that Canada has a transportation cost advantage based on
shipping distance. The West Coast provides a direct
route to Asian markets that’s shorter than
those from the US and on par with
Australian shipping times. To access Asia,
the world’s premium-priced LNG market, US
cargos will have to travel through the Panama
Canal. And, while the expanded canal will cut
shipping times significantly, there is still much
uncertainty around tolls.
Canadian LNG production not only faces
competition from other countries but from other
energy resources. Coal and nuclear power production is
on the rise in many countries. Japan’s Prime Minister Shinzo
Abe has suggested that the country may restart a significant
portion of its nuclear reactors. And although Germany has
SUMMER 2014
|
page 9