Bloomberg: Russia-China gas deals spell big trouble for Canadian LNG
Read this Nov. 10 story from business news leader Bloomberg on the increased pressure deals between Russia and China for natural gas are placing on would-be LNG exporters – especially Canada. Based on these new market conditions, only one in 20 LNG projects planned for 2020 around the globe are likely to proceed.
Companies looking to approve liquefied natural gas plants in the next couple of years and start shipments at the end of the decade will probably experience delays, according to energy consultants Tri-Zen International Inc.
Gas-supply agreements between Russia, the world’s largest energy exporter, and China, the biggest consumer, are adding to pressure on projects that are already facing increasing competition, rising costs and the prospect of lower prices.
“It’s just bad news generally” for LNG around the world, said Peter Howard, president of the Canadian Energy Research Institute. “It’s going to get really crowded.”
China and Russia signed an initial gas accord two days ago, after a $400 billion deal earlier this year. The tie-up means that only one-in-20 proposed LNG projects targeting the 2020 market will be needed, while one-in-five seeking 2025 sales will be required, according to a Macquarie Group Ltd. report.
“It’s not good news for projects hoping to get to a final investment decision in the next year or two,” Tony Regan, a consultant at Singapore-based Tri-Zen, said today. “Those developers will need to think about the post 2020 market.”
The export of new supplies to Asia increases the possibility of a glut in global energy markets by early next decade. Once deliveries begin, China would supplant Germany as Russia’s biggest gas market, even as relations have soured with the U.S. and Europe over the Ukraine crisis.
Multibillion-dollar projects led by companies including Royal Dutch Shell Plc, Petroliam Nasional Bhd., Chevron Corp. and Exxon Mobil Corp. (XOM) are among more than 20 proposals for LNG export that Canadian regulators have approved or are considering from the nation’s Pacific and Atlantic Coasts. Most Canadian projects are scheduled to begin after 2020.
“The Canadian ones are probably the most vulnerable,” Regan said by phone.