Russia-China gas deal: The elephant in the room at LNG conference

Russia-China gas deal: The elephant in the room at BC LNG conference

Russia-China gas deal: The elephant in the room at LNG conference
BC Minister of Natural Gas Rich Coleman opens his government’s LNG conference (BC govt flickr photo)

Last week, the BC Government held its second annual LNG In BC Conference, with over 1,400 delegates representing some of the world’s top players in the natural gas industry. The province’s Minister of Natural Gas Development Rich Coleman noted that this year’s conference saw an increase of almost 1,000 delegates.

Most panels centred on the potential opportunity for a BC LNG industry, but the elephant in the room at the Vancouver Convention Centre was a natural gas pipeline deal signed between Russia and China on the eve of the conference. Though barely addressed from the stage, it provided a powerful reminder to delegates of the competitive international market the province will have to navigate to make its LNG vision a reality.

Bad timing for BC LNG players

Russia’s completion of a $400-billion deal to satisfy approximately one third of China’s gas needs is bad timing for BC LNG, as companies such as Chevron and Petronas look towards final investment decisions over the next year.

Natural gas will be supplied to China for the low cost of $10-$11 a unit, providing China a bargaining advantage to reduce energy prices from other potential trading partners in North America. Canadian exporters has their hopes set on $16/unit, based on the higher prices Japan is paying following the Fukushima-driven shutdown of its nuclear sector.

Russian leader Vladimir Putin said that this is the biggest contract in the history of the country’s gas sector, a reality which was absent from virtually all conversation on the global natural gas market discussed at the conference.

Clark downplays contract’s significance

BC Premier Christy Clark and Shell Oil Company CEO Marvin Odum discuss LNG (BC govt flickr photo)
Premier Clark and Shell Oil Company CEO Marvin Odum (BC govt flickr)

Premier Clark brushed off questions as to whether this agreement would have a negative impact on BC’s race to export LNG, saying that her government had anticipated the deal. Much of this hinges on whether the province can secure final investment decisions and nail down competitive tax rates quickly enough to be a credible player in the LNG market. Given that many of these details are far from being confirmed, questions arise as to whether LNG is  the ‘generational opportunity’ it is being presented as for BC.

With 14 LNG projects proposed alongside intense global competition, Premier Clark acknowledged that so far, only two of these projects are nearing final investment before the next election. The smaller Woodfibre LNG near Squamish looks like the best bet for the first project, but it is meeting with growing opposition from local groups.

Pressure to speed up BC LNG

These delays don’t bode well for BC, a fact which Andy Calitz, CEO of the Shell-led partnership LNG Canada, responded to by saying, “That is why we need to move quickly.”

For her part, Premier Clark suggested Canada is potentially a more reliable supplier than politically volatile Russia:

[quote]I don’t think there is a country in the world that today wants to depend on Russia as their sole supplier of natural gas.[/quote]

Whether BC can be a reliable supplier, however, depends on whether these LNG projects actually come to fruition. Clark is depending on LNG to fulfil the election promise of a ‘debt free BC’, a multi-billion dollar prosperity fund, jobs and economic development. The fact that news of this Russia-China deal dropped right before the conference with minimal discussion of its effect on BC LNG may be symptomatic of the government’s desire to sell LNG instead of fostering a frank conversation about its opportunities and challenges.

Honest discussion in short supply

China has long been considered an important market for BC, and the impact of billions of tonnes of natural gas that will flow from Russia to China must be analyzed. One of the only comments made by Natural Gas Development Minister Rich Coleman on the deal came at the end of the conference:

[quote]We beat the Russians at hockey and we’ll beat them at liquefied natural gas.[/quote]

Determining the potential for a BC LNG industry requires frank discussion and tough questions, not more hot air about this cold gas.


About Alexandria Mitchell

Alexandria's work spans various subjects including renewable energy advancement,natural resources, and sustainable development both in Canada and the Asia Pacific region. She also work's in media and public affairs having been a writer, editor, and media professional. From studying political science at the University of British Columbia to covering the Olympic games in London, looking at low carbon development in Guyana, working on energy issues in New Delhi, to working as an research analyst at high level government meetings on climate change. Alex's Specialties include: Renewable Energy, International Trade and Development, Raising Capital, Conflict Resolution, International Negotiations, Media Relations, and Public Speaking. She enjoys writing for the Common Sense Canadian, seeing the publication as an opportunity to provide frank analysis on some of the most pressing energy issues we face today.

13 thoughts on “Russia-China gas deal: The elephant in the room at BC LNG conference

  1. ‘I don’t think there is a country in the world that today wants to depend on Russia as their sole supplier of natural gas.’

    I can think of one… China for starters, to the tune of $400 billion. And a few other countries who are now and have been for some time 100% dependant on Russian gas.

    And nat gas trading lower and lower everyday…that is why they ‘need to move fast’ because the more scared people are that this will all ‘go up in smoke’ the more tax ‘concessions’ we MUST give her LNG buddies.

    Complete and total theft. China and Russia will win out in the end. Russia will start signing deals with India and Pakistan soon enough also and that ‘asian market’ that Canada was going to diversify the LNG to, will no longer need a cent of our gas.

    Russia has lost nothing on the sanctions and in fact they are the biggest boost to their economy in some time. China can easily put tarriffs on Canada gas also if they feel Canada is escalating to much sanctions to Russia.

    China also holds the trump card. What would happen to BC real estate if China said ‘no more properties in BC/Canada? Or, even better, what happens as Chinese property values continue to plummet and people need to sell here to make good on bad property bets in China?

    Further to it all, if the liberals check chinese energy consumption, it is actually going down, and fast, because they are contracting, like the EU… so Liberals, who exactly is going to need this gas… at any price? No one, but we can guarantee Clark will be the provincial purse on 00’s.

  2. This is a step backwards moving to expand the LNG Gas Field in BC.! As a Province we need to diversify and expand, invest in non -fossil fuels. Clark’s mentality and direction is in the wrong direction and will destroy what is beautiful in BC, our fragile environment. I ask you what considerations or thought has been employed to address all values of the land and of our First Nation people’s living in BC.? Absolutely Nothing from this Government.

  3. Russia is not a friend to its environment. B. C. should be a friend to its environment. LNG will do nothing but kill our environment which is the fresh air and the outdoors that we all enjoy so much. Add to that our fresh water which will not be fresh once LNG gets ahold of it. There is no winner in this. We have to work towards a cleaner environment and a society which relies on an energy source that does not destroy our air, land, and water.

  4. This is B.C. we are talking about here. The delay capital of the universe it’s an industry in itself in B.C.

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