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LNG offers possible bounty Canadian research organization, international energy head dangle multibillion dollar riches if governments allow LNG exports Gary Park For Petroleum News
A report by the Canadian Energy Research Institute, jointly funded by industry and government, shows why British Columbia has every reason to hope the head of the International Energy Agency is right in predicting that Canada has the potential to become a global leader in LNG supplies.
Basing its estimates on the Apache-operated Kitimat LNG project, CERI estimated development of the Horn River basin, along with revenues from pipeline and terminal operations could contribute more than C$160 billion to Canada’s Gross Domestic Product over the 2010-35 period.
Employee compensation and tax revenues would add about another C$82 billion.
The study said that compared with current North American gas pricing, Kitimat offers potential netbacks to gas producers of C$5-C$7 per thousand cubic feet provided the high demand for gas and Asian oil-linked pricing remain in place.
Eastern Asia ideal CERI said eastern Asia, especially Japan, shapes up as the ideal market for Canadian LNG in the light of depressed commodity prices in the U.S. and Canada.
“Furthermore, the demand in Asia for natural gas has been outpacing supply which has further increased prices,” the report said. “Producers can expect to get a higher netback price for selling liquefied natural gas in Asia than in North America even if liquefaction plants are capital intensive.”
CERI said there is “really no alternative for Horn River gas (from northeastern British Columbia) in the North American market as the entire continent has low gas prices in comparison to the rest of the world.”
The report estimates that:
• Development of Horn River over the 25-year study period would create 834,000 jobs (person-years) in Canada, of which 768,000 would be based in British Columbia, pumping C$161 billion into GDP, with B.C. reaping C$152 billion. Employee compensation in B.C. would be C$39.4 billion and tax revenues would total C$36.8 billion.
• The Pacific Trail Pipeline from Horn River to the Kitimat terminal would create 31,000 jobs, 24,700 of them in B.C., C$2 billion in GDP (C$1.5 billion in B.C.) and a combined C$1.47 billion in employee compensation and taxes in B.C.
• Construction and operation of the Kitimat terminal would give B.C. 97,000 of the total 112,000 jobs, with the province benefiting from C$6.6 billion of the C$7.8 billion in GDP and Canada collecting C$6.8 billion in employee compensation and taxes.
The ‘if’ in export opportunity Maria van der Hoeven, executive director of the International Energy Agency, told business leaders in Calgary that an LNG export opportunity exists for Canada if new production from Siberia, Australia or offshore Africa is unable to keep pace with demand in Asia, especially China.
She estimated that China’s annual gas demand growth over the next five years will be “around five times more than Canada’s declining gas declining gas exports to the U.S. over the past five years.”
“With Canadian exports of natural gas to the U.S. set to decline over the coming few years, we will see a shift towards Asia,” provided governments can achieve the delicate balance between development of shale gas or tight oil resources through technological innovations without imposing excessive regulations in response to any extreme opposition from residents to well fracturing.
Van der Hoeven said that “given the uncertain prospects of nuclear power in Japan, the political drive to clean up the Chinese energy system and the acute energy shortages in India, Asia is intensely looking for LNG supplies.”
She warned that if governments ban or impose “unnecessary restrictions on upstream access,” creating a less secure energy supply, the U.S. could “return to being a large LNG importer, Chinese imports would double and all of those increases would come from conventional sources in Russia and the Middle East.”
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