British Columbia Premier Christy Clark is holding tight to the hope that was a key to her landslide election victory in 2013 and will likely get recycled in the 2017 campaign.
Although her over-promise-under-deliver message of 2013 that British Columbia would have its first LNG terminal operational in 2015, followed by at least two more in the next five years, is rapidly crumbling, she opened a new session of the provincial legislature with continued resolve.
But the government also admitted that it won’t meet its promised timelines to establish an LNG industry from the 20 proposals that are being reviewed and evaluated.
“There is no question unforeseen global conditions are posing new challenges,” said the government’s speech outlining priorities for the legislative session.
“Low global prices will have an impact ... on the government’s initial timelines. But government has done everything it set out to do to attract investment for the cleanest LNG in the world.
“As companies consider their best opportunities to reach final investment decisions, your government will continue to work to bring home the opportunity of LNG in B.C.”
Global challenges
At the same time, the government gave a broad hint of its likely defense in the 2017 election for its failure to generate even one cent of the C$100 billion in LNG revenue promised in 2013.
“Success is not for quitters,” read the speech. “Success demands steadfast attention and resiliency in the face of global challenges.”
The extent of those challenges is being hammered home on an almost daily basis, with a new report by the Brattle Group injecting a new warning that longer-term competition from renewable energy in Europe and Asia might stall the entry of Canada and the United States into the global marketplace.
The report cited several LNG projects in North America as potentially risky ventures now that Asian prices have plunged from US$15 per million British thermal units to US$6-US$7 per million BTUs.
The Brattle report acknowledged that the looming LNG glut could be short-lived if forecasts that gas-fired power generation in China, Japan, South Korea and Taiwan could double over the next 20 years.
It also said that investment in wind and solar power in key European and Asian LNG markets is likely to make a dramatic increase.
Increasing investment risk
“The investment risk of the proposed LNG export projects is increasing because there is a significant possibility that, over the 20 years of a typical LNG contract, power production from renewable energy sources will become less costly than the LNG prices needed to justify the upstream LNG investment cost even without considering the value of avoided greenhouse gas emissions,” the report said.
David Watson, a lawyer specializing in energy with the firm of Clark Wilson, said it is inevitable that renewable will eventually supplant power generation from fossil fuels.
However, he said the Brattle report ignored important markets such as heating and transportation in focusing exclusively on the demand for gas and LNG in the utility power sector.
“The report is deficient because it assumes that the sole purpose for LNG is electrical generation,” Austin told the Business in Vancouver publication. “It will be wonderful when you get to the point where renewables completely displace fossil fuels, but we’re not there yet, and you also have to think in terms of both the electricity generation markets and the transportation markets.”
Other analysts suggest that “gas-on-gas competition” poses a far greater challenge to LNG in Asia than renewable, with that competition coming from Russia’s vast gas deposits and China’s unexploited shale gas and coalbed methane resources.
Brad Hayes, president of the consulting firm Petrel Robertson, shared that view, rating the potential impact of renewable as a “relatively minor risk factor for (B.C.) target markets, particularly in Asia.”
Upbeat about economy
In reaching for other upbeat messages, the Clark government said British Columbia’s economy leads Canada, creating 50,000 jobs in 2015 and laying the groundwork for a “strong, diverse and growing economy” by eliminating the province’s operating debt within four years, “paving the path toward a debt-free B.C.”
The government also delivered an uncharacteristic broadside at Alberta - “a province of similar size and also blessed with natural resources.”
“Over the decades, Alberta lost its focus. They expected their resource boom never to end, failed to diversify their economy and lost control of government spending.
“So today, with the price of oil at historic lows, global markets shutting down, and the Canadian dollar falling, it has never been more important to stay vigilant.
“To protect British Columbia from global trends we must continue to work hard with determination and resist the temptation to spend our way into trouble,” the government said, in offering another broad hint of its campaign platform.
