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Released March 21, 2023 | SUGAR LAND
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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--A wave of new export facilities for liquefied natural gas (LNG) in North America helps solve some of the recent energy security issues, but if the criticism is valid, it does little to address economic concerns at home.
The provincial government of British Columbia opted to let the US$7.2 billion floating Ksi Lisims LNG facility enter the environmental review process. As planned, the facility would be able to process as much as 2 billion cubic feet of natural gas per day into super-cooled LNG, presumably for the Asian economies. Subscribers to Industrial Info's Global Market Intelligence (GMI) Production Project Database can click here for more details.
That followed consent for the Cedar LNG, another project slated for Canada's western coast, and both come on the heels of a positive step forward for Shell plc's (NYSE:SHEL) (London, England) mega project at Kitimat, British Columbia.
Subscribers can click here for the report on the Cedar project and here for Shell's project.
Combined, the three facilities offer something rare for Canada -- access to markets outside of North America. But it may come with a catch. Federal forecasts show marketable Canadian natural gas production may have topped out at 15.5 billion cubic feet per day in 2020 and is on pace for a slow, but steady decline to about 13 billion cubic feet per day by 2050.
"After 2040, with LNG exports assumed to say flat, total production begins to decline," Canada's energy regular predicted.
For Canada's southern neighbor, there's no shortage of similar developments. Consultant group Wood Mackenzie expected the United States, if it hasn't already, to pass Australia and Qatar this year to become the largest LNG exporter in the world.
Federal U.S. estimates show total LNG exports averaged 10.6 billion cubic feet per day last year and that could expand by nearly 20% to reach 12.7 billion cubic feet per day next year.
U.S. natural gas production, meanwhile, is expected to hover around 100 billion cubic feet per day for the foreseeable future. Natural gas remains an essential component of the domestic energy mix and production is expected to linger close to the five-year average.
In terms of pricing, the U.S. Energy Information Administration (EIA), the statistics office of the Department of Energy, offered a mixed outlook. The price for Henry Hub, the U.S. benchmark for the price of gas, could move higher as a result of increased LNG exports, but not enough to stimulate more production.
"We expect natural gas production will be relatively flat for the rest of 2023 as producers reduce drilling in response to lower prices," the EIA's monthly market report for March stated.
LNG exports are nothing new -- the first deliveries were made during the 1950s as the Cold War was developing. Russia's invasion of Ukraine in early 2022 brought a wave of new interest in LNG deliveries because they have less of a geopolitical consequence than piped natural gas.
Ukraine hosts a dense network of Soviet-era pipelines that were designed to meet European natural gas needs. Cross border pipelines, such as the now-abandoned Nord Stream network in the Baltic Sea, require multinational cooperation and multinational commitments to develop and effectively tie suppliers and consumers together.
LNG does that too in the form of long-term sales and purchase agreements, though the bonds are less concrete and rarely, if ever, multinational. Nevertheless, with the United States taking on Russia's market share in Europe, the super-cooled form of gas does broadcast power over the horizon.
But it may come with tradeoffs. While LNG supports Western allies and feeds the energy-hungry markets of Asia, it's a volatile market sector, as warnings from both the EIA and the Canadian energy regulator suggest.
To be clear -- neither country will run out of natural gas. The Canadian Gas Association, for example, estimates the nation has enough reserves to satisfy more than 200 years of annual demand.
But too much too fast could overwhelm the sector. Volatility in natural gas prices makes it difficult to bet on the future and exports take away from domestic needs. In the U.S. economy, renewables start to take on a greater share of the grid, but natural gas still accounts for nearly 40% of total U.S. electricity.
And while recommendations from advocacy groups of any variety should be taken with a grain of salt, an observation from the Natural Resources Defense Council holds some merit given the rising tide of new LNG projects.
"Unfortunately, these lucrative overseas exports are now contributing to higher home-heating costs across the United States," it said. "As the demand for gas has rebounded from pandemic lows, both globally and in the United States, the U.S. LNG industry remains focused on maximizing shareholder returns rather than meeting the domestic market demand--and so costs to consumers have risen."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
The provincial government of British Columbia opted to let the US$7.2 billion floating Ksi Lisims LNG facility enter the environmental review process. As planned, the facility would be able to process as much as 2 billion cubic feet of natural gas per day into super-cooled LNG, presumably for the Asian economies. Subscribers to Industrial Info's Global Market Intelligence (GMI) Production Project Database can click here for more details.
That followed consent for the Cedar LNG, another project slated for Canada's western coast, and both come on the heels of a positive step forward for Shell plc's (NYSE:SHEL) (London, England) mega project at Kitimat, British Columbia.
Subscribers can click here for the report on the Cedar project and here for Shell's project.
Combined, the three facilities offer something rare for Canada -- access to markets outside of North America. But it may come with a catch. Federal forecasts show marketable Canadian natural gas production may have topped out at 15.5 billion cubic feet per day in 2020 and is on pace for a slow, but steady decline to about 13 billion cubic feet per day by 2050.
"After 2040, with LNG exports assumed to say flat, total production begins to decline," Canada's energy regular predicted.
For Canada's southern neighbor, there's no shortage of similar developments. Consultant group Wood Mackenzie expected the United States, if it hasn't already, to pass Australia and Qatar this year to become the largest LNG exporter in the world.
Federal U.S. estimates show total LNG exports averaged 10.6 billion cubic feet per day last year and that could expand by nearly 20% to reach 12.7 billion cubic feet per day next year.
U.S. natural gas production, meanwhile, is expected to hover around 100 billion cubic feet per day for the foreseeable future. Natural gas remains an essential component of the domestic energy mix and production is expected to linger close to the five-year average.
In terms of pricing, the U.S. Energy Information Administration (EIA), the statistics office of the Department of Energy, offered a mixed outlook. The price for Henry Hub, the U.S. benchmark for the price of gas, could move higher as a result of increased LNG exports, but not enough to stimulate more production.
"We expect natural gas production will be relatively flat for the rest of 2023 as producers reduce drilling in response to lower prices," the EIA's monthly market report for March stated.
LNG exports are nothing new -- the first deliveries were made during the 1950s as the Cold War was developing. Russia's invasion of Ukraine in early 2022 brought a wave of new interest in LNG deliveries because they have less of a geopolitical consequence than piped natural gas.
Ukraine hosts a dense network of Soviet-era pipelines that were designed to meet European natural gas needs. Cross border pipelines, such as the now-abandoned Nord Stream network in the Baltic Sea, require multinational cooperation and multinational commitments to develop and effectively tie suppliers and consumers together.
LNG does that too in the form of long-term sales and purchase agreements, though the bonds are less concrete and rarely, if ever, multinational. Nevertheless, with the United States taking on Russia's market share in Europe, the super-cooled form of gas does broadcast power over the horizon.
But it may come with tradeoffs. While LNG supports Western allies and feeds the energy-hungry markets of Asia, it's a volatile market sector, as warnings from both the EIA and the Canadian energy regulator suggest.
To be clear -- neither country will run out of natural gas. The Canadian Gas Association, for example, estimates the nation has enough reserves to satisfy more than 200 years of annual demand.
But too much too fast could overwhelm the sector. Volatility in natural gas prices makes it difficult to bet on the future and exports take away from domestic needs. In the U.S. economy, renewables start to take on a greater share of the grid, but natural gas still accounts for nearly 40% of total U.S. electricity.
And while recommendations from advocacy groups of any variety should be taken with a grain of salt, an observation from the Natural Resources Defense Council holds some merit given the rising tide of new LNG projects.
"Unfortunately, these lucrative overseas exports are now contributing to higher home-heating costs across the United States," it said. "As the demand for gas has rebounded from pandemic lows, both globally and in the United States, the U.S. LNG industry remains focused on maximizing shareholder returns rather than meeting the domestic market demand--and so costs to consumers have risen."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
