​Canadian LNG could still take the lead over US competitors on the West Coast: NEB

Illustration of the proposed Woodfibre LNG project. Image: Woodfibre LNG

Canada may have missed the boat on the first wave of opportunity to develop LNG export projects, but it could beat its biggest competitor for a slice of the second.

The global LNG supply/demand balance is expected to tighten around 2020-21, which is when the National Energy Board (NEB) expects Canadian exports from the B.C. coast will join the market.

It is here where Canada could take the lead from the United States, the NEB said in a report released on Tuesday.

“Canada has the opportunity to become an LNG exporter before U.S. west coast projects. At this point, no U.S. west coast project has reached a final investment decision,” the NEB said.

While Canadian west coast LNG projects may have some advantages, the NEB acknowledged the challenges they face.

"Disadvantages facing Canadian projects include high costs to develop projects in remote locations with limited infrastructure, and, where the construction of new pipelines is required to supply the necessary gas. With LNG prices falling in recent years, the margins needed to justify this type of capital-intensive development have eroded. Increased competition has also made it difficult for Canadian projects to sign long-term supply contracts," the board said.

There are 24 LNG projects proposed in Canada, with 18 of these located on the B.C. coast. One of the B.C. projects—the relatively small scale (2.1 million tonne per annum) Woodfibre LNG project near Squamish—is the only Canadian project to have received corporate sanction.

“There are more proposed LNG projects on the West Coast than on the East Coast. This is because there is significant gas supply in northeast B.C. and Alberta and many of the largest LNG project proponents are also gas producers in western Canada aiming to maximize the value of their producing assets by seeking alternate markets. Secondly, the West Coast is a shorter distance to the primary target market of Asia,” the NEB says.

“Most of the proposed projects in the U.S. are located along the Gulf of Mexico. However, the Jordan Cove project is located along the U.S. West Coast and would compete with Canadian west coast projects with respect to proximity to Asian markets.”

The proposed six million tonne per annum Jordan Cove project is located within the Port of Coos Bay, Oregon, owned by the Calgary-based merged new combination of Veresen Inc. and Pembina Pipeline Corporation. It has yet to receive regulatory approval, although in February the Federal Energy Regulatory Commission (FERC) cleared the way for it to move through the process by approving its pre-filing application.

While corporate sanction for the Woodfibre project is in place and early site work has commenced, construction is not yet underway. In October 2016 the privately-held Canadian project proponent awarded two parallel contracts for project front end engineering and design, one to KBR and the other to JGC America. At the time, Woodfibre said the FEEDs were expected to take eight months, after which it would award the construction contract.

"Canada is a late entrant to global LNG markets and the next several years will be critical to the development of the Canadian LNG industry," the NEB said.