Energy industry “turmoil”

A rendering of the Pacific Northwest LNG project.

FORT ST. JOHN, B.C. – The latest bad news from LNG Canada regarding its proposed liquefied natural gas project in Kitimat, does not bode well for the government of Christy Clark.

Consortium CEO Andy Calitz has confirmed a world-wide drop in natural gas prices, particularly in Asia, has made the project too expensive for now.

So now international partners behind the project have decided to again delay their final investment decision, and that means it will not likely be coming before next year, and perhaps not prior to the May election.

Politics aside it’s now reportedly a given that global oil and gas prices will have to recover before the four companies in the consortium led by Shell will move forward with the project that would cost up to 50 billion dollars to build and annually export up to 24 million tonnes of LNG.

All four companies are said to be on the same page, but Mr. Calitz says, “It is important for the community to understand that the project has been delayed and has not been cancelled.”

However, it is undoubtedly a sour pill to swallow for the BC Liberal government, which has long staked the province’s financial future, and arguably its own political future on LNG industry development and most likely doesn’t wish to face the electorate next spring without any major project set to move forward.

So the LNG Canada decision puts the issue squarely in the court of Petronas, and its other Asian partners, behind the Pacific Northwest LNG project, but they too appear reluctant to make a final investment decision with the global energy industry in what Mr. Calitz calls “turmoil”.

That turmoil is also believed to be the key cause of the drop in monthly sales of BC crown petroleum and natural gas rights, with the next one scheduled for tomorrow.

Coming off a dismal 2015 with a bonus bids total of only 18 point three million dollars, the government is now looking at less than four and half million for the first half of this year, and is on pace for the second year in a row to fall short of the lowest total in 38 years of Natural Gas Ministry records, which was 16 point seven million dollars in 1982.

A Monday call to Minister Rich Coleman hoping to get his insight has thus far been unanswered, but in fairness we were warned, that might be the case.