By Kenneth P. Green
and Taylor Jackson
The Fraser Institute
CALGARY, Alta. April 12, 2016/ Troy Media/ – Amidst a global glut of natural gas, and implacable opposition from environmentalists and some First Nations leaders, British Columbia’s dream of exporting liquefied natural gas (LNG) to world markets is at risk of becoming a pipe dream.
New warnings about Canada’s waning potential to export LNG are coming from some surprising places. We’re accustomed to hearing these warnings from energy companies, think-tanks, industry associations, and Canadian politicians. But recently, Japan’s [popup url=”https://www.biv.com/article/2016/3/window-lng-exports-japan-are-closing-ambassador/” height=”1000″ width=”1000″ scrollbars=”1″]ambassador[/popup] to Canada, of all people, said Canada is running out of time if it hopes to supply Japan with LNG. Japan wants LNG to comprise 27 per cent of its energy mix by 2030. The ambassador’s warning comes just days after Canada’s federal environment minister announced yet another three-month delay in the regulatory approval process for Pacific NorthWest LNG. The process has now taken more than 750 days when it was initially supposed to last only a year.
The Pacific NorthWest LNG facility is [popup url=”http://business.financialpost.com/news/energy/malaysias-petronas-threatening-to-abandon-lng-project-over-new-climate-change-rules?__lsa=0bca-0dc1″ height=”1000″ width=”1000″ scrollbars=”1″]seen[/popup] as the frontrunner among more than 20 proposed LNG projects in B.C. Indeed, an increasing number of other proposed LNG projects in the province, such as the AltaGas-led Douglas Channel LNG project and Royal Dutch Shell’s project, are being delayed and shelved.
Consider some of the recent policy announcements regarding LNG. In January, the federal government [popup url=”http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/ottawa-to-mandate-climate-tests-for-proposed-pipelines/article28391364/” height=”1000″ width=”1000″ scrollbars=”1″]announced[/popup] that it will require LNG terminal environmental reviews to consider both the direct and upstream greenhouse gas (GHG) emissions of these projects. Details as to what this means, of course, will be announced at some later date.
These new climate tests will only add to the regulatory barriers and compliance costs Canadian energy companies already face, compounding the effects that low energy prices already have on the industry.
And non-development will also come with substantial economic costs. A recent Fraser Institute [popup url=”http://www.fraserinstitute.org/sites/default/files/LNG-exports-from-british-columbia.pdf” height=”1000″ width=”1000″ scrollbars=”1″]study[/popup] found that the cost of delay imposed upon LNG investments in B.C., defined as export revenues forgone, is substantial, at C$22.5 billion per year in 2020 and rising to C$24.8 billion per year in 2025. Even if sales were cut in half, the losses would still be significant, totalling about five per cent of B.C.’s 2014 GDP.
The National Energy Board’s recent Canada’s Energy Future 2016 [popup url=”https://www.neb-one.gc.ca/nrg/ntgrtd/ftr/2016/index-eng.html” height=”1000″ width=”1000″ scrollbars=”1″]report[/popup] also shed some light on what LNG means for Canada’s natural gas industry. In a scenario where no LNG exports occur between 2015 and 2040, Canadian natural gas production might only experience two per cent growth compared to 19 per cent growth in a scenario with LNG exports.
Finally, it’s ironic that the climate tests will only focus on direct and upstream emissions from LNG facilities, and won’t capture the potential climate benefits associated with using natural gas for electricity in places like the Asia Pacific, which [popup url=”http://www.bp.com/content/dam/bp/pdf/energy-economics/statistical-review-2015/bp-statistical-review-of-world-energy-2015-full-report.pdf” height=”1000″ width=”1000″ scrollbars=”1″]consumed[/popup] more than 70 per cent of global coal consumption in 2014.
Increasingly, it looks like B.C. may miss out on supplying LNG to Asian and global markets, foregoing private and public economic gains that could improve the lives of British Columbians and all Canadians. Others, however, including Australia and the United States, are eager to satisfy that demand. Let’s hope things don’t turn out that way.
Kenneth P. Green is Senior Director and Taylor Jackson is a Policy Analyst in Natural Resource Studies at The Fraser Institute.
Ken and Taylor are Troy Media [popup url=”http://marketplace.troymedia.com/our-contributors/” height=”1000″ width=”1000″ scrollbars=”1″]contributors[/popup]. [popup url=”https://www.troymedia.com/become-a-troy-media-contributor/” height=”600″ width=”600″ scrollbars=”1″] Why aren’t you?[/popup]
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