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Is Natural Gas As Clean As We Think?
Is Natural Gas As Clean As We Think?
This week U.S. President Barack Obama took aim at the American coal industry as part of a comprehensive climate change plan to limit air emissions from what many consider the country’s worst polluter.
Under the plan, states will have until 2030 to cut CO2 levels by a third from what they were in 2005. Outside the United States, Europe is using less coal, the Canadian province of Ontario shut down its coal-fired power generation (albeit in favor of more expensive renewables), and the World Bank last week rejected the notion that coal can cure poverty.
Even coal-hungry China has banned coal-fired power plants in Beijing, finally cowing to health and environmental concerns in the smog-choked capital.
Having turned their backs on coal, many countries are looking to natural gas as an alternative power source. China is plunging headlong into building liquefied natural gas import terminals, and countries are lining up to export it, including Australia, Russia and the United States, which in 2014 approved its fourth LNG export terminal, Dominion Cove Point in Maryland.
Related: Global Oil Supply More Fragile Than You Think
British Columbia’s governing Liberal Party has staked its political future on developing LNG terminals to receive natural gas from the Canadian province’s northeast region, telling voters in the last election it would use revenues from LNG production to wipe out the provincial debt.
Part of the sales job was to characterize natural gas as a clean fuel whose use will actually help decrease global fossil fuel emissions, since nations that switch to it are typically moving from dirty coal-fired power to clean LNG.
But is natural gas really as pristine as its proponents claim?
Not according to a new report released by the Environmental Defense Fund (EDF) in June. The report estimated the amount of gas that is leaked, vented or flared from natural gas and oil production on U.S. federal and tribal lands. It found that 65 billion cubic feet was released in 2013 – the equivalent of the greenhouse gases produced by 5.6 million cars. In New Mexico, a methane “hot spot,” was detected by NASA satellites and in one drilling-heavy part of Wyoming a town measured air pollution readings that rivaled Los Angeles.
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Petronas’s Silence on BC LNG Act Sends Disquieting Signal
Petronas’s Silence on BC LNG Act Sends Disquieting Signal
Busy passing project terms, BC forgot to check on events abroad.
As the British Columbia legislature passed its “historic” Liquefied Natural Gas Project Agreements Act on July 21 after a lively eight-day debate, the most important player for which the special summer session of Parliament was convened kept an aloof — and worrying — silence.
Petronas, the Malaysian state energy firm with a 62 per cent stake in a consortium proposing to build a US$36-billion LNG project near Prince Rupert, did not offer a public thank you or congratulatory statement to the B.C. government of Premier Christy Clark for its efforts and hard-earned legislative victory.
The Pacific NorthWest LNG (PNW) consortium’s other shareholders, Sinopec (10 per cent), Indian Oil Corp (10 per cent), Japan Petroleum Exploration (10 per cent), China Huadian (five per cent) and PetroleumBrunei (three per cent), have been equally quiet.
It was left to PNW to issue a brief statement that the act — followed by the July 23 ratification of 25-year agreement terms covering royalty, income tax credits and carbon emissions — “brings us one step closer to building Canada’s first world-scale LNG facility.”
“The remaining condition of our final investment decision, environmental approval from the government of Canada, is being worked on diligently with First Nations, stakeholders and government representatives.”
Petronas’s silence is significant as B.C.’s elaborate undertaking to create, debate and pass the LNG act had been made in direct response to the company’s high-profile complaints and threats to call off the project if it did not receive legal certainty and the offer of generous investment terms. Petronas did not reply to a request for comment on B.C.’s new act.
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BC’s Gas Export Hopes Face ‘Scandal that Ate Malaysia’
BC’s Gas Export Hopes Face ‘Scandal that Ate Malaysia’
Asian nation’s PM, key to $36 billion LNG bid by Petronas, in corruption probe.
The prime minister of Malaysia, who is central to British Columbia’s liquefied natural gas development ambitions, is the subject of a major financial corruption scandal rocking his country.
Earlier this month The Wall Street Journal, citing documents from government probes, reported that investigators suspected that almost $700 million in cash had been wired through state agencies, banks, and companies linked to 1Malaysia Development Berhad (1MDB).
The company is a state-owned development vehicle chaired by Malaysian Prime Minister Najib Razak, who also serves as the country’s treasury minister.
Investigators believe the $700 million eventually found its way into Najib’s personal accounts and served as a slush fund for the last election. Malaysia has few rules on campaign donations or election spending.
Najib is the top authority overseeing Malaysia’s state-owned oil company Petronas, whose massive potential investment in B.C. liquefied natural gas (LNG) was greenlit by the provincial legislature earlier this month.
Now, The Australian and other news sources are saying reports of corruption have paralyzed the Malaysian government. “The scandal that ate Malaysia” is how U.S. business news agency Bloomberg is dubbing the financial brouhaha.
The debacle threatens to undermine the nation’s economy, according to an expert writing for East Asia Forum: “Malaysia’s international credibility is on the line, as is its currency, access to foreign capital and future economic prosperity.”
To date a task force investigating the 1MDB allegations has already frozen half a dozen bank accounts in Malaysia.
Petronas key to Clark’s LNG ambitions
In May of 2014, Premier Christy Clarksat for a photograph with Najib, central to any deal she sought with Petronas. The meeting was part of an eight-day trip to Malaysia and Hong Kong to promote LNG development after Clark made election campaign promises that LNG would create 100,000 jobs and erase the province’s debt.
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Nine LNG Questions for British Columbians to Ask Their Politicians
Nine LNG Questions for British Columbians to Ask Their Politicians
Pressing queries in light of high-stakes Petronas agreement just passed.
Pacific Northwest LNG, a consortium that includes Petronas and Chinese refining giant Sinopec, intends to build an export terminal on Lelu Island near Prince Rupert. The Lax Kw’alaams have opposed the project as a threat to salmon and the Skeena River.
The unprecedented agreement, which critics havecharacterized as a crass economic giveaway, guarantees Malaysia’s state-owned company low royalties and low taxes for LNG over a historic 25 years.
Martyn Brown, former chief of staff to B.C. premier Gordon Campbell and a top strategic advisor to three provincial party leaders, has described the agreement as “environmentally reckless, fiscally foolhardy and socially irresponsible.”
The deal effectively makes it difficult for future governments to set LNG-specific carbon taxes or to impose new environmental rules aimed at curbing greenhouse gas emissions. It locks in tax credits for 25 years. And it offers no job guarantees for British Columbians.
In addition to the terms of the agreement, politicians and citizens should now be asking nine critical questions about any LNG development in the province.
1. Have LNG projects become uneconomic?
Many LNG analysts now think the world is oversupplied with the product and that price volatility warrants project deferrals, especially for high-cost proposals in North America. Othersreckon that capital for major projects is rapidly drying up. Carbon Tracker, a non-profit group of financial analysts concerned about climate change, justreported that investors will likely mothball tens of billions of dollars in LNG investment because “there is a finite amount of fossil fuels that can be burnt over the next few decades if we are to prevent dangerous levels of climate change.”
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BC LNG Lost Its Window of Opportunity, Study Finds
BC LNG Lost Its Window of Opportunity, Study Finds
Projects unlikely to be economic for another decade: Oxford Institute energy report.
The window of opportunity to capture Asian gas markets has eluded proposed liquefied natural gas projects in British Columbia, and as a consequence it is unlikely that any LNG projects will likely be commissioned or economic for another decade.
That’s the central conclusion of a new study on the prospects for natural gas extraction and export in Canada by the London-based Oxford Institute for Energy Studies released earlier this month. The institute operates as a non-profit charity that has looked at the economics and politics of energy since 1982.
Despite large volumes of shale gas and government hype over the industry, the study found that changing energy markets, global price volatility, increased competition, and LNG cost overruns have dramatically changed the demand picture for high-risk and capital intensive LNG projects around the world.
Even Asian demand for natural gas has softened significantly over the last year. Demand for imported gas in Japan is now “flat,” and in Korea it has “dampened,” the report says.
China’s thirst for natural gas has also slackened since 2010 due to pipeline expansions and the signing of long-term LNG contracts.
According to Cambridge Energy Associates, spot LNG imports into China dried up last summer, “and spot prices last winter, usually a peak demand season, were reported to be less than $7 per million BTU, from as high as $20 several years ago.”
(The BTU is a standard unit of energy which represents the amount of heat energy needed to raise the temperature of a pound of water by one degree Fahrenheit. It is equal to 1055 joules, another common energy measurement.)
Furthermore, LNG construction in the United States, Australia and other countries will be bringing more gas to global markets between 2015 and 2020, explains the Oxford Institute study.
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Who Is BC’s Big LNG Partner? A Petronas Primer
Who Is BC’s Big LNG Partner? A Petronas Primer
Group led by Malaysia’s national oil company aims to build terminal near Prince Rupert.
Just one week after the Lax Kw’alaams band rejected a $1-billion offer by Petronas to build a liquefied natural gas terminal at the mouth of the Skeena River in British Columbia, Premier Christy Clark has signed an agreement with Malaysia’s national oil company to “establish the path to a final investment decision on the project.”
Part of that path includes a long-term commitment by the provincial government not to raise natural gas royalties, regardless of changes in global prices for the commodity.
Natural gas, like oil, is one of the world’s most volatile commodities in price.
“With this certainty, industry can plan their operations over a longer period of time and commit capital to jobs and production needs, while the Province has a guaranteed royalty revenue each year,” said a government news release.
Pacific NorthWest LNG, which is largely owned by Petronas, has yet to make a final investment decision, and the proposed multibillion-dollar project near Prince Rupert must still pass an environmental review.
Just what kind of company is Petronas, and what’s its relationship to the Malaysian government? The Tyee looked at the public record.
1. The government of Malaysia set upthe national oil company in 1974 when oil prices jumped from $1.50 to $12. The government did so with the goal of safeguarding “the sovereign rights of Malaysia and the legitimate rights and interests of Malaysians in the ownership and development of petroleum resources.” The company’s success has helped the government to reach out to the Muslim world.
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Canadian LNG Export Future Delayed, But Not Dead Yet
Canadian LNG Export Future Delayed, But Not Dead Yet
As the Lax Kw’alaams community rejected a $1 billion offer from Pacific NorthWest LNG as compensation for a proposed natural gas project this week, the global energy community took notice. With the native tribe turning down such an enormous sum of money, the rejection could put a chill on Canada’s energy investment prospects. Worse, it also raised the possibility that Canada would be shut out of the vast Asian markets that it needs to offload the natural gas the United States no longer wants. But the reality is more nuanced than that.
Community engagement has become far more important for oil and gas projects, and in accordance with international best practices, indigenous communities should be involved in a process of free, prior, and informed consultation. Cases in Canada, and across the Western Hemisphere, have shown that agreement between governments, private firms, and indigenous communities is possible. And when done well, everyone stands to gain.
Pacific NorthWest LNG, which is owned by Malaysian national oil company Petronas plus Sinopec, JAPEX, Indian Oil Corporation, and Petroleum Brunei, has been negotiating with the Lax Kw’alaams band council since 2011. The major point of contention is over the impact of the project on local fisheries, in particular salmon. Both sides have commissioned environmental reviews that come to different conclusions. Pacific NorthWest has offered to build a bridge it argues will protect the area, but the community is dissatisfied with the solution. The Canadian Environmental Agency’s own review is due later this year.
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Petronas Hoping To Buy First Nations Tribes’ Support For $1 Billion
Petronas Hoping To Buy First Nations Tribes’ Support For $1 Billion
Petronas is willing to pony up nearly $1 billion to secure the support of First Nations tribes in western Canada for its natural gas export project. The Malaysian state-owned oil company is offering C$1.15 billion (USD$950 million) to the Lax Kw’alaams tribe in order to build an LNG export facility at the Prince Rupert port.
The offer would consist of annual payments over 40 years. For example, Petronas would pay over $12 million in the first year, with payments rising by 1 to 5 percent annually (depending on production), culminating in a $50 million payment in the 40th year. Also, tribe members would have a sort of preferred status for open jobs at the Petronas’ Pacific Northwest LNG facility. The offeramounts to about $320,000 per person. The Lax Kw’alaams tribe will vote on the offer in May.
Related: Is This The Top For Oil Prices For Now?
The tribes argue the price is hardly exorbitant. When one considers it will be spread over 40 years and the project will result in large land use impacts on local communities, the $1 billion is a fair price. “This will be a real game-changer for many First Nations in terms of how they can build their future,” John Rustad, the Aboriginal Relations and Reconciliation Minister in British Columbia, told the Globe and Mail in an interview on April 30.
Interestingly, it could create a new benchmark for major fossil fuel projects on indigenous lands. For other projects to move forward, affected tribes could use the pending offer for the Lax Kw’alaams as leverage.
The big offer from Petronas is somewhat of an afterthought for the C$36 billion proposal. That steep price tag has forced a rethink within the Malaysian company. In December 2014, Petronas decided to put off a final investment decision, hesitating to commit that much money to an LNG export project during a period in which LNG markets are not doing so well.
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No Wealth, No Justice in $1 Billion LNG Offer to First Nation Band
No Wealth, No Justice in $1 Billion LNG Offer to First Nation Band
Here’s why Lax Kw’alaams still side with the salmon.
Leonardo Boff, a Brazilian theologian and writer known for his work among the poor and the excluded, is credited with coining a phrase that is as true as any you’ll ever hear: ”The opposite of poverty is not wealth — it is justice.”
It is a phrase that has also been attributed to Bryan Stevenson, founder of America’s Equal Justice Initiative and a man Archbishop Desmond Tutu has called, without qualification, ”America’s Nelson Mandela.”
Regardless of the provenance of the expression, it is the potency of the underlying idea that should be freighted into the unseemly scramble to unlock northern British Columbia’s dangerously exaggerated liquefied natural gas (LNG) bonanza, especially now that some coastal First Nations are bellying up to the pipe to get their overdue share of Canada’s resource riches.
To read reports emanating from the mouth of the Skeena River, the energy sector thinks it has finally cracked the nut on how to successfully partner with First Nations people who, inconveniently, stand afore a variety of proposed LNG plants and pipeline deals. These aboriginal people have rights along the planned pipeline routes, and also at tidewater, where Canada is trying to unstopper our oil and gas supplies so the Chinese can drain off our energy sovereignty like so much bilge water.
Industry’s latest poster child is the Lax Kw’alaams Band, whose main village at Port Simpson is situated on the coast north of Prince Rupert, where the waters of the Skeena and the Nass rivers mingle and nurse some of the finest wild salmon populations left on the planet.
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Squamish Mayor Says No to LNG Plant, with Strings Attached
Squamish Mayor Says No to LNG Plant, with Strings Attached
Terminal pumped by premier would process up to 2.1 million tonnes of gas a year.
The mayor of Squamish and her council will not support the proposed Eagle Mountain pipeline and Woodfibre LNG plant in the region unless 18 conditions are met, according to an April 30 letter to the provincial Environmental Assessment Office.
“Due to the significant outstanding information and the community concerns that have not been adequately addressed, and that there are no guarantees at this time that that they will be satisfactorily addressed, the current applications are not supportable by the District of Squamish,” said the letter, signed by Mayor Patricia Heintzman.
The Woodfibre LNG terminal, planned for the site of a former pulp and paper mill seven kilometres west-southwest of downtown Squamish, would have a 250,000 cubic metre storage capacity and process up to 2.1 million tonnes of liquefied natural gas a year.
Owner Pacific Oil and Gas Ltd. is part of Indonesian billionaire Sukanto Tanoto’s empire. Natural gas supplier FortisBC, which built a pipeline in 1990 for the Sunshine Coast and Vancouver Island, proposes a 52-km long, 20-inch diameter gas pipeline from north of the Coquitlam watershed to Squamish that would feed the plant.
Squamish council is already in a legal battle with FortisBC, which filed a B.C. Supreme Court petition in March, hoping a judge will overturn council’s refusal to permit borehole testing for the pipeline.
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Tanking Asia Gas Prices Makes BC LNG ‘Not Viable,’ Expert Says
Tanking Asia Gas Prices Makes BC LNG ‘Not Viable,’ Expert Says
A liquified natural gas industry, as currently promoted by British Columbia’s Liberal government, is not viable at current natural gas prices, and the proposed industry tax regime actually “gives a subsidy to the LNG industry,” according to a royalty expert.
Jim Roy, a former royalty advisor to the Alberta government of Peter Lougheed and now a private Edmonton-based consultant, said the profitability of any liquefied natural gas industry in the province in truth depends on artificially high natural gas prices in China.
The natural gas price in B.C. needs to be less than half the price of natural gas in China for the nearly 24 proposed LNG projects in the province to be economic, but that differential is rapidly narrowing, Roy said.
Not one proposed LNG project in B.C. has made a final investment decision yet.
Since the advent of falling oil prices, the spot price for natural gas — the so-called Japanese Korea Marker — has plummeted. Global LNG prices are tied to oil prices.
When the B.C. government announced its liquefied natural gas push in 2012, the volatile Asian gas price was as high as $16 per million British Thermal Units (MMBtu), or more than triple North American prices.
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LNG Another Casualty Of Low Oil Prices
LNG Another Casualty Of Low Oil Prices
The oil industry is facing rising debt from collapsing oil prices, but there could be another sector that becomes a casualty of the low oil price environment: liquefied natural gas (LNG).
Much of the global LNG trade occurs in Asia, where buying and selling occurs according to long-term fixed contracts that are indexed to the price of oil. As a result, when oil prices were high, so were LNG prices. That is exactly why there has been a rush along the U.S. Gulf Coast to begin exporting cheap American natural gas to take advantage of high prices in Asia.
The practice of indexing LNG contracts to the price of oil was something that Japan, the world’s largest consumer of LNG, had hoped to change. High oil prices were inflicting an economic toll on Japan, which had radically increased energy imports after shuttering its nuclear reactors. However, oil-indexed contracts cut both ways. Now with oil prices hovering around $50 per barrel – less than half of what they were last summer – spot cargoes for LNG have seen their prices collapse as well. Japan is in no hurry to see the industry undergo dramatic reforms.
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Is The Canadian LNG Export Dream Dead?
Is The Canadian LNG Export Dream Dead?.
Lower oil prices have killed off major plans for liquefied natural gas exports from Canada’s west coast.
On December 2 the state-owned oil company of Malaysia, Petronas, decided to shelve plans to build an enormous LNG export terminal in British Columbia, citing the falling price of oil. It is common for LNG contracts to be priced using a formula linked to the price of crude oil, so declining oil prices pushes down prices for LNG.
Petronas’ Pacific NorthWest LNG, as it was known, was a proposed $32 billion export terminal that would send LNG to Asia. The decision highlights how competitive global LNG trade has become, despite growing demand. Greenfield projects, such as Pacific Northwest LNG, face steep startup costs that become prohibitive when oil prices fall.
Related: Russia-China Deal Could Kill U.S. LNG Exports
Although low oil prices may have been the icing on the cake, Canadian LNG projects were facing serious obstacles before oil prices plummeted. There is stiff competition from a slew of LNG projects already under construction in the U.S. and Australia, which will come online much earlier than anything from British Columbia.
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