The School of Public Policy of the University of Calgary released a major research paper this week entitled: Risky Business, the Issue of Timing, Entry, and Performance in the Asia-Pacific LNG Market. Key conclusions:
- “Timing is one of the key challenges Canada faces. Producers around the world—including in the newly gas-rich United States—are racing to lock up market-share in the Asia-Pacific region, in many cases much more aggressively than Canada. While this market is robust and growing, the nature of the contracts for delivery will favour actors that are earliest in the queue; margins for those arriving late will be slimmer and less certain over time. As supply grows, so too does the likelihood of falling gas prices in the Asia-Pacific region, making later projects less lucrative. LNG projects are feasible only on the basis of long-term contracts; once a piece of market share is acquired, it could be decades before it becomes available again. Currently, there are more proposed LNG-export projects around the world than will be required to meet projected demand for the foreseeable future.”
- “Delays beyond 2024 risk complete competitive loss of market entry for Canadian companies. B.C. is behind schedule on the government’s goal of having a single terminal operational by 2015. Of equal concern is the lack of policy and regulatory coordination, with disagreements between governments over standards, process and compensation for those stakeholders involved in the potential LNG industry. Issues as basic as taxing and royalty charges for gas shipments between provinces and locating facilities and marine-safety standards remain unsettled in Canada. The B.C. government has announced plans to levy special taxes on LNG, a policy that could render many current proposals uncompetitive.”
- “The LNG market is much more complicated than current discussions suggest; this report delves into every aspect relevant for Canada as a potential exporter. The prospect for Canada expanding into the Asia-Pacific market is entirely viable.Canada has almost everything going for it: political stability, free-market principles, immense resources, extensive infrastructure and industry experience. Everything, that is, except a coordinated regulatory and policy regime (emphasis added).”
To download the report (PDF): Click Here.