CPABC Industry Update Summer 2014 - Page 9

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 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