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Liquefied natural gas will either be a major economic boon for the Canadian economy or a dud, depending on which recent report you favour.
The Institute for Energy Economics and Financial Analysis (IEEFA) on Monday published a report responding to an earlier economic analysis by the Conference Board of Canada that estimates the annual investment in LNG in Canada could total $11 billion annually between 2020 and 2064, and $500 billion in total.
B.C. alone would generate 71,000 new jobs per year and more than $4.6 billion in wages, the Conference Board estimated.
“At $2 billion in annual provincial taxes and royalties, the LNG sector could become one of the largest revenue generators in B.C.,” the report stated.
However, that analysis does not indicate how many LNG export projects that calculation is based on. In a report released Monday, the IEEFA points out only one large LNG project is moving forward in Canada—the $40 billion LNG Canada project in B.C.—and casts doubt on whether a second one—Kitimat LNG—will ever be built.
“The most important fact is that the fundamentals of British Columbia’s LNG export cost structure are not competitive enough to keep private capital interested,” the IEEFA report states. “Although many pundits cite political and regulatory issues, Canadian LNG’s biggest problem is profitability.”
The IEEFA suggests Canadian LNG projects won’t be able to compete with Qatar, on a price basis. Then again, few countries can.
It’s estimated that any new large LNG projects will need a break-even price of US$7 to US$8 per MMBTU of delivered LNG.
Qatar is expanding brownfield projects and restructuring contracts to build new LNG export facilities that could deliver LNG at US$5 MMBTU, Clark Williams-Derry, an analyst with the IEEFA, told BIV News.
“That’s going to put price pressure on the entire global stack of LNG projects,” Williams-Derry said.
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