LNG developers could be merging proposals along lines of Exxon model

Lelu Island, site of the proposed Pacific NorthWest LNG terminal/Photo: Brian Huntington

TOKYO, JAPAN – According to IHS Markit Ltd., Canadian LNG developers will mostly likely start to band together and merge proposed projects, similar to developers in Papua New Guinea as the low price of natural gas limits cashflow for individual export terminals.
Bloomberg News is reporting that IHS chief upstream strategist Bob Fryklund says that producers must also green-light projects now so that they’re up and running by 2022, when the market will be in deficit. According to Bloomberg New Energy Finance, at least 20 proposed projects in B.C. haven’t seen a final investment decision. Frykland says that the companies behind those proposals should share facilities to produce LNG, like Exxon Mobil has proposed for its venture in Papua New Guinea with Total SA and Oil Search Ltd.

“Papua New Guinea is going to end up with one liquefaction plant and some people own individual trains. That is probably the model that will happen in Canada,” Fryklund said Thursday in an interview in Tokyo. “It’s a competitiveness issue, there is still some consolidation going on among the operators.”

Royal Dutch Shell, Exxon Mobil and Chevron are all involved in separate LNG proposals in B.C. Malaysian state-owned Petronas received approval for the Pacific NorthWest LNG project subject to 190 conditions in September, though it hasn’t yet made a final investment decision.

The spot price of LNG in Northeast Asia, while rising 2.2 percent to $6.95 per million BTUs on Monday, has fallen nearly 67 percent from its peak in 2014 as new projects allowed supply to outpace demand. As a result of the glut, new onshore greenfield developments have gone forward since December 2013, according to Wood Mackenzie Ltd. analyst Chong Zhi Xin.

“There will still be LNG projects going forward but it has to be extremely competitive,” Fryklund added. “The bulk of the new LNG is still going to come out of the U.S. Gulf Coast.”

Story courtesy Bloomberg News: http://boereport.com/2016/10/27/exxons-pacific-lng-model-seen-as-future-for-canadian-gas/

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