CALGARY C Collapsing energy prices along with a growing global surplus of a liquefied gas have dealt another blow to British Columbia’s intends to develop an LNG industry.
AltaGas Ltd. said Thursday it’s shelving its Douglas Channel LNG plant, widely one among the B.C. frontrunners, saying it was unable to find customers for the super-cooled natural gas.
“The Douglas Channel consortium continues to be not able to secure meaningful off-take agreements for the project,” AltaGas CEO David Cornhill said during his company’s fourth-quarter earnings call.
The announcement marks the first time a Canadian LNG proposal continues to be shelved due to a lack of customers.
Related
- Small-scale LNG projects in Bc nudge aheadWhile LNG project waits, Calgary’s AltaGas Ltd focuses on propane
-
-
-
It’s additionally a problem for B.C. Premier Christy Clark’s hopes for LNG development in her province – at some point she said three projects might be built in the province by 2020.
“It’s not great, I would like them all to go ahead but I’ve always said that out of 20, we may not get these,” B.C. Gas Development Minister Rich Coleman told reporters.
Other projects proposed for B.C. have been delayed. Shell Canada Ltd. postponed your final decision on its planned LNG project for the B.C. coast this month, and Malaysia’s state-owned energy company Petronas has yet to sanction its Pacific Northwest LNG project.
While Canadian LNG projects are stalled, U.S. companies have started exporting gas, contributing a global supply glut.
Bloomberg News reported that the LNG tanker bound for Brazil leaves Cheniere Energy Inc.’s Sabine Pass facility in Louisiana on Wednesday filled with U.S. shale gas.
However, Vancouver-based energy lawyer David Austin with Clark Wilson LP said that U.S. shipment isn’t necessarily a sign that the nascent B.C. LNG industry has lost a race to market with U.S.-based competitors.
“The B.C. LNG race is into the Pacific and that i noticed that first cargo appearing out of the United States is going to Brazil,” Austin said. “South America and Europe are not markets for B.C.”
Cornhill said he believes the LNG market will balance “sometime,” but also said AltaGas won’t spend any more money on the project at the moment. The company posted a $54 million net loss in the fourth quarter.
“We make significant progress in development and permitting from the project, and we believe the project could deliver LNG to Japan at very huge discounts. However, with no meaningful off-take agreement, the consortium can no longer continue the development of the work,” Cornhill said.
AltaGas had previously delayed Douglas Channel due to a tax dispute with the Canadian authorities.
Though the tax dispute continues to be resolved, the company paused the project “due to adverse economic conditions and worsening global energy prices.”
Low crude costs are weighing on the global LNG market, as contracts for that fuel in many cases are associated with oil.
“The marketplace is while adjusting from as being a sellers’ market for Ten years to potentially an extended period like the ’80s and ’90s where there’s s surplus in which the buyers are now in control and the buyers will start to dictate terms,” said Ted Michael, an LNG analyst with Genscape.
AltaGas president and chief operating officer David Harris said the company’s other LNG proposal, called Triton LNG, has additionally been put on the “backburner, the slowburner.”
“We’ll see how the markets balance out within the coming years,” he said of Triton.
The company did not offer an updated timeline for Douglas Channel, which had been scheduled to begin shipping the super-cooled natural gas at the begining of 2018.
It will, however, still work toward sanctioning liquid propane gas export facilities, including one near Prince Rupert, B.C. this season.
AltaGas announced it signed an agreement with Ridley Terminal Inc. to build up the export terminal, which would ship 1.Two million tonnes of propane each year to foreign markets.
gmorgan@nationalpost.com
Twitter.com/geoffreymorgan
