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CALGARY C Collapsing energy prices along with a growing global surplus of a liquefied natural gas have dealt another blow to British Columbia’s intends to develop an LNG industry.
AltaGas Ltd. said Thursday it’s shelving its Douglas Channel LNG plant, widely one among the B.C. frontrunners, saying it had been unable to find customers for the super-cooled natural gas.
“The Douglas Channel consortium has been unable to secure meaningful off-take agreements for that project,” AltaGas CEO David Cornhill said during his company’s fourth-quarter earnings call.
The announcement marks the very first time a Canadian LNG proposal continues to be shelved as a result of insufficient customers.
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It’s additionally a problem for B.C. Premier Christy Clark’s hopes for LNG rise in her province – at some point she said three projects might be built-in the province by 2020.
“It’s not great, I would like them all to go ahead but I’ve always asserted out of 20, we might not get all of them,” B.C. Natural Gas Development Minister Rich Coleman told reporters.
Other projects proposed for B.C. have been delayed. Shell Canada Ltd. postponed a final decision on its planned LNG project for the B.C. coast this month, and Malaysia’s state-owned energy company Petronas has yet to sanction its Pacific Northwest LNG project.
While Canadian LNG projects are stalled, U.S. companies have started exporting gas, contributing a worldwide supply glut.
Bloomberg News reported that an LNG tanker bound for Brazil leaves Cheniere Energy Inc.’s Sabine Pass facility in Louisiana on Wednesday full of U.S. shale gas.
However, Vancouver-based energy lawyer David Austin with Clark Wilson LP said that U.S. shipment is not necessarily an indication that the nascent B.C. LNG industry has lost a race to promote with U.S.-based competitors.
“The B.C. LNG race is into the Pacific and that i noticed that first cargo appearing out of america is going to Brazil,” Austin said. “South America and Europe are not markets for B.C.”
Cornhill said he believes the LNG market will balance “sometime,” but additionally said AltaGas will not spend anymore cash on the project at the moment. The company posted a $54 million net reduction in the fourth quarter.
“We make significant progress in development and permitting from the project, and we believe the project could deliver LNG to Japan at very huge discounts. However, with no meaningful off-take agreement, the consortium can’t continue the development of the project,” Cornhill said.
AltaGas had previously delayed Douglas Channel because of a tax dispute using the Canadian federal government.
Though the tax dispute has been resolved, the company paused the project “due to adverse economic conditions and worsening global energy prices.”
Low crude prices are weighing around the global LNG market, as contracts for the fuel are often linked to oil.
“The marketplace is while adjusting from as being a sellers’ market for Ten years to potentially an extended period like the ’80s and ’90s where there’s s surplus in which the buyers are now in control and also the buyers will begin to dictate terms,” said Ted Michael, an LNG analyst with Genscape.
AltaGas president and chief operating officer David Harris said the business’s other LNG proposal, called Triton LNG, has additionally been put on the “backburner, the slowburner.”
“We’ll see how the markets balance out within the coming years,” he explained of Triton.
The company didn’t offer an updated timeline for Douglas Channel, that’s scheduled to start shipping the super-cooled gas in early 2018.
It will, however, continue to work toward sanctioning liquid propane gas export facilities, including one near Prince Rupert, B.C. this year.
AltaGas announced it signed a contract with Ridley Terminal Inc. to build up the export terminal, which would ship 1.Two million tonnes of propane each year to foreign markets.
gmorgan@nationalpost.com
Twitter.com/geoffreymorgan
