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BC Looks like an LNG Loser: Report

BC Looks like an LNG Loser: Report

Prospects have been battered by global competition, volatility, delays and cost overruns.

Once touted as an economic powerhouse, the liquified natural gas industry is on the rocks, according to a worldwide survey of LNG terminals from the Global Energy Monitor, a non-profit research group responding to climate change.

LNG terminals are among the largest capital projects attempted in modern industry, costing up to $30 billion per project. Gas is extracted from underground deposits, piped to LNG plants where it is compressed by cooling to liquid form, loaded onto ships and transported to other markets.

“The sheer size of the projects has exposed investors to catastrophic losses,” said Lydia Plante, lead author of the just-released report.

The survey found that planned projects representing 38 per cent of global export capacity are facing delayed final investment decisions and other serious hold-ups. Cost overruns are common.

Canadian LNG is particularly bad off, Ted Nace, executive director of the Global Energy Monitor, told The Tyee. “The problem with the Canadian LNG expansion is that it’s especially vulnerable because Canada is a high-cost producer on a world basis.”

That’s because Canada plans to produce its LNG from fracking — an energy and capital-intensive process to access gas hidden deep inside shale rock.

Canadian LNG comes up short on the global market, said Nace, particularly when it competes against countries where conventional gas sources make LNG cheaper to produce.

And global competition is only getting fiercer. Qatar and Russia, for example, have vast supplies of cheap natural gas. “These super low cost producers,” said Nace, “are not giving up market share without a fight.”

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Worst Drought in 91 Years Turns Brazil Into Hot Spot for LNG

  •  State-run oil company is seeking liquefied natural gas cargoes
  •  Water crisis curbs hydropower supplies across South America

As hydropower output declines, South America’s most populous nation is turning to the super-chilled fuel to keep lights on for its 212 million people. Brazil has already imported a record number of LNG cargoes just from the U.S. this year while state-run oil company Petrobras SA is tapping the spot market for another four.

The drought comes as the nation — which boosted its ability to import LNG in 2014 to avoid blackouts during soccer’s World Cup — is facing declining gas production from major supplier Bolivia. The conditions are also affecting other countries in South America, with Chile seeking to buy LNG and traders speculating Argentina could be next.

Brazil's Thermal Power Rises as Hydro Slides

“South America is running out of hydropower because of dry weather, and I wouldn’t be surprised if buyers all across the region were buying more LNG,” said Henning Gloystein, global director of energy and natural resources at consultants Eurasia Group. “Besides Southeast Asia and India, South America is a growth area for gas demand.”

Hydropower currently accounts for about 70% of Brazil’s electricity mix, and the lack of rainfall has forced the country to import 34 U.S. LNG cargoes over the past six months to bridge the power-supply gap, shipping data compiled by Bloomberg show. That eclipses the 17 sent to Chile and four to Mexico, which has long been the top buyer of U.S. LNG in the Western Hemisphere. Brazilian imports are approaching levels typically seen only from buyers in Asia and Europe.

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LNG in BC Is a ‘Losing’ Bet, Report Finds

LNG in BC Is a ‘Losing’ Bet, Report Finds

New analysis calls out rosy job projections for industry ‘misleading’ and unrealistic.

A respected U.S. energy group has criticized a rosy Conference Board of Canada report championing more liquefied natural gas development in British Columbia as “a lobbying effort for government subsidies, support and flexibility.”

The scathing critique by the Institute for Energy Economics and Financial Analysis characterized the Conference Board report as “misleading,” short on facts and unrealistic.

“The Conference Board, a non-profit economic research organization based in Ottawa, believes Asian, or more specifically, Chinese demand growth can sustain a further leap in British Columbian LNG capacity growth, despite corporate investors already folding their hands,” said the institute in its highly-critical paper.

The Ohio-based institute is funded by a variety of philanthropic organizations and examines issues related to energy markets, trends and policies. Its mission is “to accelerate the transition to a diverse, sustainable and profitable energy economy.”

The Conference Board’s July report, titled “Rising Tide,” estimated that if the government boosted LNG development to export 56 million tonnes of liquefied natural gas a year the industry would create 100,000 jobs based on an imaginary growth scenario.

“B.C. is becoming the focal point for a new Canadian industry — liquefied natural gas,” claimed the report, which failed to mention that 13 LNG projects have already been cancelled or suspended in B.C. and other parts of Canada due to bad economics, global oversupply and high extraction costs based on hydraulic fracturing.

At the moment, Shell’s LNG Canada is the only active project in B.C.

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Shell’s Colossal Miscalculation in 2011 of Today’s LNG Price: Largest-Ever $12-$17-Billion “Floating Facility” Shut Down, Months After Shipping First LNG. Done in by Long Price Collapse

Shell’s Colossal Miscalculation in 2011 of Today’s LNG Price: Largest-Ever $12-$17-Billion “Floating Facility” Shut Down, Months After Shipping First LNG. Done in by Long Price Collapse

Built to profit from sky-high LNG Prices in Japan. Sunk by surging US LNG Exports, multi-year collapse in LNG prices, global LNG glut.

The Great East Japan Earthquake and subsequent tsunami in March 2011 triggered a series of events at the Fukushima power plant that led to catastrophic meltdowns in three of its six reactors, which led Japan to take the remaining of its 54 operating reactors offline, as a new regulatory and safety regime was established for reactors to come back on line. This caused a mad scramble to switch to other forms of power generation, including power plants fired by natural gas, which Japan has to import as liquefied natural gas (LNG), which triggered a blistering spike in LNG prices that caused all kinds of enormous long-term investments to be commenced around the world, including in the US and in Australia, in order to export super-lucrative LNG into booming Asian demand.

But in 2014, the price of LNG started sinking, and in 2015, it plunged, and those investments became huge money pits – including perhaps the largest of them all, Shell’s floating LNG-factory, the Prelude FLNG, at a length of 1,600 feet, the largest floating facility ever built, and at an undisclosed cost estimated to have been in the range between $12 billion and $17 billion, now languishing off the coast of Australia (the red hull is the Prelude, the smaller ship in front of it is a huge LNG tanker; image by Shell):

In April 2014, the average spot price of LNG at arrival in Japan was $18.30 per million Btu, according to Japan’s Ministry of Economy, Trade, and Industry (METI). This is as far as its data series goes back.

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By Many Calculations, LNG Is a Fail for BC: Report

By Many Calculations, LNG Is a Fail for BC: Report

The math for liquefied natural gas is bad on emissions, revenues, jobs, even offsetting coal in China, finds a new study.

JohnHorganInvestingCanada.jpg
Go figure. BC NDP Premier John Horgan announcing in 2018 a $40-billion investment by the consortium LNG Canada in its Kitimat terminal for processing and export. Photo: BC Government.

David Hughes, one of the nation’s foremost energy analysts, has a simple message for the governments of British Columbia and Canada when it comes to advocating for LNG projects.

“Do the math.”

Hughes has parsed the numbers and they don’t add up on methane emissions, climate change targets, resource royalties, job benefits or even basic economics.

“The math is clear,” says Hughes, whose latest 57-page report on LNG exports highlights a long pipeline of damning figures.

Emissions targets: Won’t LNG help hit them? The numbers say noThe Tyee is supported by readers like you Join us and grow independent media in Canada

The province’s CleanBC plan, for example, demands an 80-per-cent reduction in greenhouse gas emissions by 2050 from 2007 levels.

But Hughes, who was a scientific researcher for 32 years at the Geological Survey of Canada, checked the math on emissions based on energy production forecasts made by the Canada Energy Regulator.

His math is conservative. It excluded any LNG exports. It assumes current major reductions in methane leaks from gas extraction might be plugged. And it further assumes the electrification of some upstream projects. Still, Hughes found that “emissions from oil and gas production would exceed B.C.’s 2050 target by 54 per cent.”

(A group of scientists writing in Nature found the same thing on a global scale last year: just using existing fossil fuel infrastructure takes the world into climate change hell.)

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The LNG Market Is “Imploding”

The LNG Market Is “Imploding”

LNG tanker

While everyone is understandably watching the meltdown in the crude oil market, the global market for natural gas is also cratering.

At least 20 cargoes of U.S. liquefied natural gas (LNG) have been cancelled by buyers in Asia and Europe, according to Reuters. The global pandemic and the unfolding economic crisis have slashed demand for gas worldwide. Cheniere Energy, one of the main exporters of U.S. LNG, has seen an estimated 10 cargoes cancelled by buyers halfway around the world, Reuters said.

The price for LNG in Asia was already crashing before the pandemic, owing to a substantial increase in supply last year. Prices for LNG in Asia for June delivery have recently traded at $2/MMBtu, only slightly higher than Henry Hub prices in the U.S.

As recently as October, LNG prices in Asia traded at just under $7/MMBtu.

The problem for American gas exporters is that after factoring in the cost of liquefaction and transportation, gas breakeven prices for delivering to Asia are around $5.56/MMBtu, according to Reuters. But prices are trading at less than half of those levels.

Gas exports tend to be conducted under rigid contracts, but cargoes are now facing cancellation.

“The financial prospects for [LNG] ? once one of the globe’s hottest energy commodities – seem to be imploding before our eyes,” Clark Williams-Derry wrote in a new report for the Institute for Energy Economics and Financial Analysis (IEEFA). He noted that LNG prices in the fall of 2018 were at around $12/MMBtu.

The oil majors have made large bets on LNG in recent years. Royal Dutch Shell spent more than $50 billion to buy BG Group in 2015. The move back then was made with an eye on surging demand for natural gas. “We will now be able to shape a simpler, leaner, more competitive company, focusing on our core expertise in deep water and LNG,” Shell’s CEO Ben van Beurden said after closing on the acquisition of BG Group more than four years ago.

The deal remade Shell into one of the largest traders of LNG on the planet. Several other oil majors – Total SA, ExxonMobil and Chevron, for instance – have also made massive bets on LNG.

“Gasmaggedon” Sweeps Over Global Gas Market

“Gasmaggedon” Sweeps Over Global Gas Market

CNOOC LNG

China’s state-owned gas importers are considering declaring force majeure on LNG imports, which would amplify the turmoil in global gas markets.

LNG prices have already plunged to their lowest levels in a decade in Asia as the ramp up of supply in 2019 came at a time when demand has slowed. That was true before the outbreak of the coronavirus. But the quarantine of around 50 million people and the shutdown of huge swathes of the Chinese economy has sent shockwaves through commodity markets.

Shipments of oil and gas are backing up at Chinese ports, which is creating ripple effects across the world. Now, Chinese state-owned CNOOC is considering declaring force majeure on its LNG import commitments, according to the FT. Sinopec and CNPC are also apparently considering the move.

Prices were already in the dumps. JKM prices recently fell to 10-year lows. But they have continued to decline, approaching $3/MMBtu for the first time in history. Just a few weeks ago, JKM prices were trading at around $5/MMBtu, itself an incredibly low price for this time of year.

LNG exports from the U.S. are uneconomical at these price levels. Many exporters have contracts at fixed, higher prices. But shipments can be cancelled for a fee. And any spot trade would be hit hard. The question now is whether shipments will come to halt. “Forward prices for summer are now at levels where U.S. LNG shut-ins begin to seem viable,” Edmund Siau, a Singapore-based analyst with energy consultant FGE, told Bloomberg. “There is usually a lead time before a cargo can be canceled, and we expect actual supply curtailments to start happening in summer.”

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Green Myths Canada’s LNG Sales Force Tells the World

Green Myths Canada’s LNG Sales Force Tells the World

No, methane’s no fix for global coal-fired energy. Here’s why.

Trudeau-Horgan-Handshake-Cover.jpg
Prime Minister Justin Trudeau and B.C. Premier John Horgan shake hands as LNG Canada CEO Andy Calitz, back right, watches during a news conference in October 2018. Photo by Darryl Dyck, the Canadian Press. 

Representatives of the British Columbia, Alberta and federal governments are making the global rounds these days to sell the notion that liquefied natural gas exports can help the climate crisis.

Dave Nikolejsin, deputy minister of the B.C. Ministry of Energy, Mines and Petroleum Resources, for example, flew to Japan last September along with members of the Canadian Society for Unconventional Resources.

There they tried to impress upon the Japanese attendees “the role of Canadian LNG in meeting global climate policy objectives and reducing emissions of carbon dioxide.” 

The pitch goes like this: According to LNG Canada, the big Shell project now under construction in northern B.C., could replace 20 to 40 coal-fired plants in countries like China and India with Canadian methane, and reduce their emissions by 60 to 90 million tonnes.

That’s impressive, says LNG Canada, because 90 million tons equals about 80 per cent of Canada’s car pollution. Or all of B.C.’s annual greenhouse gas emissions. The Tyee is supported by readers like you Join us and grow independent media in Canada

In fact, Darren Gee, president and CEO of Peyto Exploration, which fracks for gas in B.C., believes Canada has a “moral obligation to provide the rest of the world with the country’s clean, responsibly-developed energy to improve lives and preserve the environment.”

And so, while the blockaders of northern B.C.’s LNG Canada pipeline await police eviction while claiming to stand up for Indigenous sovereignty and climate protection, backers of the project lay claim to their own moral high ground.

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‘Clean’ natural gas is actually the new coal, report says: Don Pittis

‘Clean’ natural gas is actually the new coal, report says: Don Pittis

Global investment of more than $1 trillion in planned LNG plants at risk

Employees work next to tanks for liquefied natural gas at a factory in Xian, China in June. China is a prime customer in a worldwide LNG expansion. (Reuters)

There’s no question that when you burn it, methane, the main component of natural gas, is much cleaner than coal.

With that in mind, you might think a newly released report titled The New Gas Boom should be cause for celebration.

Instead, the fresh analysis from Global Energy Monitor, a group well known in energy circles for keeping track of coal plant construction in Asia, sounds a warning, not just for the climate but for investors in what it calculates as a risky $1.3 trillion US worth of global gas infrastructure.

Effectively, the report warns that rather than being an environment-friendly product that can help solve our climate problems, gas is the new coal.

The explosion in spending on planned new liquefied natural gas (LNG) facilities — the vast majority in the U.S. and Canada — combined with new calculations for leakage from the LNG supply chain called fugitive gas — means the world may soon turn against gas in the same way it turned against its solid fuel relative.

“New studies have shown there is significantly more fugitive gas than studies showed five years ago, and the gas is also a bigger contributor to climate change than was understood,” said James Browning, one of the report’s authors.

A 34,000-ton heavy lift vessel carries barges for LNG Canada completing pre-construction work at Kitimat, B.C., last fall to prepare the port for larger vessels once the new $40-billion natural gas export facility is constructed.(YouTube/LNG Canada)

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Latest Weapon of US Imperialism: Liquified Natural Gas

Latest Weapon of US Imperialism: Liquified Natural Gas 

One of the most important energy battles of the future will be fought in the field of liquid natural gas (LNG). Suggested as one of the main solutions to pollution, LNG offers the possibility of still managing to meet a country’s industrial needs while ameliorating environmental concerns caused by other energy sources. At the same time, a little like the US dollar, LNG is becoming a tool Washington intends to use against Moscow at the expense of Washington’s European allies.

To understand the rise of LNG in global strategies, it is wise to look at a graph (page 7) produced by the International Gas Union (IGU) where the following four key indicators are highlighted: global regasification capacities; total volumes of LNG exchanged; exporting countries; and importing countries.

From 1990 to today, the world has grown from 220 million tons per annum (MTPA) to around 850 MTPA of regasification capacity. The volume of trade increased from 20-30 MTPA to around 300 MTPA. Likewise, the number of LNG-importing countries has increased from just over a dozen to almost 40 over the course of 15 years, while the number of producers has remained almost unchanged, except for a few exceptions like the US entering the LNG market in 2016.

There are two methods used to transport gas. The first is through pipelines, which reduce costs and facilitate interconnection between countries, an important example of this being seen in Europe’s importation of gas. The four main pipelines for Europe come from four distinct geographical regions: the Middle East, Africa, Northern Europe and Russia.

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Multipolar World Order in the Making: Qatar Dumps OPEC

Multipolar World Order in the Making: Qatar Dumps OPEC

Multipolar World Order in the Making: Qatar Dumps OPEC

The decision by Qatar to abandon OPEC threatens to redefine the global energy market, especially in light of Saudi Arabia’s growing difficulties and the growing influence of the Russian Federation in the OPEC+ mechanism.

In a surprising statement, Qatari energy minister Saad al-Kaabi warned OPEC on Monday December 3 that his country had sent all the necessary documentation to start the country’s withdrawal from the oil organization in January 2019. Al-Kaabi stressed that the decision had nothing to do with recent conflicts with Riyadh but was rather a strategic choice by Doha to focus on the production of LNG, which Qatar, together with the Russian Federation, is one of the largest global exporters of. Despite an annual oil extraction rate of only 1.8% of the total of OPEC countries (about 600,000 barrels a day), Qatar is one of the founding members of the organization and has always had a strong political influence on the governance of the organization. In a global context where international relations are entering a multipolar phase, things like cooperation and development become fundamental; so it should not surprise that Doha has decide to abandon OPEC. OPEC is one of the few unipolar organizations that no longer has a meaningful purpose in 2018, given the new realities governing international relations and the importance of the Russian Federation in the oil market.

Besides that, Saudi Arabia requires the organization to maintain a high level of oil production due to pressure coming from Washington to achieve a very low cost per barrel of oil. The US energy strategy targets Iranian and Russian revenue from oil exports, but it also aims to give the US a speedy economic boost. Trump often talks about the price of oil falling as his personal victory.

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Natural Gas Skyrockets As China Pledges Huge Supply Boost

Natural Gas Skyrockets As China Pledges Huge Supply Boost

China gas

With an eye on last winter’s natural gas supply debacle, Chinese state-owned energy giant CNOOC has pledged a 20 percent rise in gas supply, the company said on Tuesday. The company, one of three state-run oil majors, said that it will supply 24.6 billion cubic meters (bcm) of natural gas during the heating season that kicks off this week, up 20 percent year-on-year, to meet rising natural gas demand in the country.

China is in the process of replacing over reliance on coal usage for both industrial and residential end users to offset rampant air pollution, particularly in its larger urban centers. By government mandate, at least 10 percent of the country’s energy mix needed for power generation by 2020 must be natural gas, with further earmarks set for 2030.

CNOOC, the country’s largest oil and gas producer, said 6.1 bcm of natural gas will be supplied to seven northern provinces and municipalities, up 63.5 percent from last year. The company added that most of the natural gas it’s supplying this year is from offshore fields, coal bed gas and imported liquefied natural gas (LNG). According to reports, CNOOC has also been negotiating with LNG suppliers to ensure gas supply, including dealers from Australia, Indonesia, Malaysia, Qatar, Nigeria and Russia. However, due to the ongoing trade war between the US and China, CNOOC spot purchases of LNG is coming to a halt amid Beijing’s retaliatory tariff on US-LNG imports.

LNG tariffs will also come full circle, since other LNG producers will likely increase their spot prices in the mid-term to a point just under US LNG prices including a tariff, with Chinese firms being forced to pay the extra price.

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Nord Stream 2 Could Still Be Derailed By U.S. Sanctions

Nord Stream 2 Could Still Be Derailed By U.S. Sanctions

Nord Stream

The potential for more tensions in relations between the U.S. and Russia continue to mount. Late last week, U.S. Energy Secretary Rick Perry said that Washington could still impose sanctions related to the building of the controversial Nord Stream 2 pipeline, which would bring Russian gas directly to Germany under the Baltic Sea. Perry made his comments in Warsaw as the Trump administration tries to convince EU members to sign LNG deals with U.S. producers to offset over reliance on Russian pipeline gas.

On Thursday, Polish state-run gas firm PGNiG signed a long-term LNG deal with U.S.-based Cheniere Marketing International. Poland has been fervent in its resistance to the Nord Stream 2 pipeline as well as working to reduce its reliance on geopolitically charged Russian gas. Moscow, for its part, has cut gas supply to Europe in the past during cold winter months to exert its influence in the region.

Warsaw and Washington also signed on Thursday a joint declaration on enhanced energy security cooperation. “This is also a clear signal that the U.S. strongly supports a pro-Poland and pro-Europe energy security policy,” Perry said. “Energy security in turn requires energy diversity. That is the reason we oppose the Nord Stream 2 project which would further increase the dangerous energy dependence many European nations have on the Russian federation,” he added.

Poland consumes around 17 billion cubic meters of gas annually, more than half of which comes from Russian energy giant Gazprom under a long-term deal that expires in 2022. However, Poland has said that it would not renew the gas supply deal, making the country race against time to replace the contract with new gas volumes.

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Germany Admits it Needs More from Russia than Nordstream 2

Germany Admits it Needs More from Russia than Nordstream 2

During the years the U.S. and its satraps in Poland and the Baltics fought the Nordstream 2 pipeline it was always apparent Germany was in the driver’s seat.  It was also apparent that this would be the wedge issue that would ultimately force Germany to pursue independent policy from the U.S.

Nordstream 2 is and was always a reaction to the U.S.’s meddling in Europe’s energy policy which this cycle of began with the scuttling of the South Stream pipeline in 2013.

From the EU’s perspective changing the rules under which South Stream would operate after the contracts for it were signed was a way of gaining leverage over Russia and Gazprom.  So too was the help protesters in Kiev received to overthrow the Yanukovich government from the U.S. and the EU.

That operation was meant to put the Ukrainian pipelines under EU control where they could dictate terms to Gazprom and choke the profit out of its gas deliveries.  It would also advance NATO and the EU to Russia’s western border and there was to be nothing Putin could do to stop the U.S. from putting nukes targeting Moscow there.

Too bad for them it didn’t work out that way.

This is one of the reasons why the U.S. is so incensed with Russia and Putin over Ukraine.  It’s why his chickenhawks in his cabinet and John McCain pushed so hard for sanctions and weapons support to Ukraine before the dearly-departed Brain Tumor killed him.

Obviously, the other was being stymied in taking over Crimea and forever losing the opportunity to grab the port at Sevastopol.

So, why the history lesson?

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Is The U.S. Using Force To Sell Its LNG To The World?

Is The U.S. Using Force To Sell Its LNG To The World?

Middle East

The Trump Administration trade policy is nowhere so clear as in the energy area. For years it was thought that the younger Bush Administration was one of the most energy industry friendly in history. But the Trump Administration has gone far beyond that.

Hiring Ray Tillerson, the former CEO of ExxonMobil, as U.S. Secretary of State, sent a strong signal to the entire industry, even though his tenure proved to be temporary.

Prior to that, the Administration withdrew from the Paris Climate Agreement, a long-held priority of Exxon and the entire oil industry. Following hard upon that, the Environmental Protection Agency (EPA) has reduced or eliminated regulations limiting carbon and other pollutants.

Exxon has for more than a decade underwritten the now discredited, right wing attack on climate change as a hoax. Although the energy industry has now publicly acknowledged climate change as a global threat, in practice the subject is still largely ignored.

Going further, the Trump Administration has removed and reduced regulations that hampered the industry expansion, including allowing drilling on both ocean coast, while easing safety regulations that were brought into effect after BP’s Gulf of Mexico disastrous spill, the worst in U.S. history.

Government protected nature preserves are being opened to exploration and drilling for the first time in generations. Added to that was the dropping of regulations that for many years prohibited export of U.S. crude. Since then, the U.S. has become a major player in the global energy industry.

The Administration currently plans to rescind and lower fuel efficiency standards for autos and trucks. That is likely to encourage increased purchase of larger SUVs, increased oil consumption, and rising gasoline prices.

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