June 4:
Only three of the nine LNG export terminal projects approved on the Canadian West Coast are likely to be built due to market constraints, physical challenges and social forces, a Calgary-based energy economist said Wednesday.
"There have been nine that have now been approved and 14 that are clamoring to build something," said Peter Tertzakian, chief energy economic and managing director of ARC Financial, on the sidelines of the Benposium conference in Houston.
"But realistically, given the mountain passes you have to cross over, the social resistance and labor pool constraints, the still fuzzy fiscal regime and First Nations' issues, those nine that have been approved will probably be whittled down to three viable candidates," he said.
Not only would fewer terminals be built than some other analysts have projected, but those that do get built will take longer to come online than forecast, said Tertzakian, also the keynote speaker at the conference.
By 2020, the year several projects have been forecast for start-up, the maximum send-out capacity from Canada's West Coast will be about 2 Bcf/d.
"I think that some of these other ones that were saying they were going to come online before 2020, will probably come online from 2020 to 2025," Tertzakian said. By 2025, Canadian LNG export capacity would increase to 4 Bcf/d-6 Bcf/d, he predicted.
The only US LNG export project assured of being built is the Sabine Pass terminal on the US Gulf Coast, he said. The proposed Cheniere Energy terminal is the only such project to have secured approvals by both the US Department of Energy and Federal Energy Regulatory Commission.
Tertzakian declined to speculate about how many other US export terminals will get built, saying a multitude of factors, including securing financing and regulatory approvals, go into the decision of whether to build these multi-billion industrial projects.
"It's all about arbitrage," he said. "As long as the money is there to attract investments to pour into these infrastructure facilities," then they will get built, he said. But both Canadian and American projects are threatened by the potential of an unexpected price rise for gas, Tertzakian said.
Tertzakian argued that a gas price of $4/MMBtu "is probably too low" to incentivize producers to drill for large quantities of gas.
"Across many different sectors there is demand growth for natural gas," he said. "Is it all going to come out of the ground at under four bucks or are you going to need progressively higher prices to bring it out of the ground to substitute for coal, to feed petrochemical plants and to send to the Mexicans through pipelines?" he asked, rhetorically.
Other factors, such as increased environmental regulations on drilling and hydraulic fracturing represent "very legitimate concerns," that also could slow the growth of North American gas production, Tertzakian said.
"What I've highlighted is a dynamic that there are no market and operational constraints to further growth in North America, but there are social, environmental and sustainability constraints that will likely amplify as the activity grows," he said. "That's also part of the overall picture that has to be factored in."
In US states such as Colorado, where a measure to restrict fracking is likely to be on the ballot this fall, additional regulation could slow production.
But Tertzakian does not foresee fracking bans as passing in those US states or Canadian provinces "that have a long history of oil and gas production and also of entrenched regulatory bureaucracy and a populace that is accustomed to the process, such as Texas, Oklahoma, Alberta," he said.
Source: http://www.platts.com/latest-news/natural-gas/houston/only-three-canadian-west-coast-lng-projects-likely-21719284?
Only three of the nine LNG export terminal projects approved on the Canadian West Coast are likely to be built due to market constraints, physical challenges and social forces, a Calgary-based energy economist said Wednesday.
"There have been nine that have now been approved and 14 that are clamoring to build something," said Peter Tertzakian, chief energy economic and managing director of ARC Financial, on the sidelines of the Benposium conference in Houston.
"But realistically, given the mountain passes you have to cross over, the social resistance and labor pool constraints, the still fuzzy fiscal regime and First Nations' issues, those nine that have been approved will probably be whittled down to three viable candidates," he said.
Not only would fewer terminals be built than some other analysts have projected, but those that do get built will take longer to come online than forecast, said Tertzakian, also the keynote speaker at the conference.
By 2020, the year several projects have been forecast for start-up, the maximum send-out capacity from Canada's West Coast will be about 2 Bcf/d.
"I think that some of these other ones that were saying they were going to come online before 2020, will probably come online from 2020 to 2025," Tertzakian said. By 2025, Canadian LNG export capacity would increase to 4 Bcf/d-6 Bcf/d, he predicted.
The only US LNG export project assured of being built is the Sabine Pass terminal on the US Gulf Coast, he said. The proposed Cheniere Energy terminal is the only such project to have secured approvals by both the US Department of Energy and Federal Energy Regulatory Commission.
Tertzakian declined to speculate about how many other US export terminals will get built, saying a multitude of factors, including securing financing and regulatory approvals, go into the decision of whether to build these multi-billion industrial projects.
"It's all about arbitrage," he said. "As long as the money is there to attract investments to pour into these infrastructure facilities," then they will get built, he said. But both Canadian and American projects are threatened by the potential of an unexpected price rise for gas, Tertzakian said.
Tertzakian argued that a gas price of $4/MMBtu "is probably too low" to incentivize producers to drill for large quantities of gas.
"Across many different sectors there is demand growth for natural gas," he said. "Is it all going to come out of the ground at under four bucks or are you going to need progressively higher prices to bring it out of the ground to substitute for coal, to feed petrochemical plants and to send to the Mexicans through pipelines?" he asked, rhetorically.
Other factors, such as increased environmental regulations on drilling and hydraulic fracturing represent "very legitimate concerns," that also could slow the growth of North American gas production, Tertzakian said.
"What I've highlighted is a dynamic that there are no market and operational constraints to further growth in North America, but there are social, environmental and sustainability constraints that will likely amplify as the activity grows," he said. "That's also part of the overall picture that has to be factored in."
In US states such as Colorado, where a measure to restrict fracking is likely to be on the ballot this fall, additional regulation could slow production.
But Tertzakian does not foresee fracking bans as passing in those US states or Canadian provinces "that have a long history of oil and gas production and also of entrenched regulatory bureaucracy and a populace that is accustomed to the process, such as Texas, Oklahoma, Alberta," he said.
Source: http://www.platts.com/latest-news/natural-gas/houston/only-three-canadian-west-coast-lng-projects-likely-21719284?
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