Two Desperate Moves In This Plunging Energy Sub-Sector

A couple of big moves in the North American liquefied natural gas (LNG) game last week. But is it too little, too late?

Interestingly, we saw big announcements on LNG coming out of both Canada and the U.S. at the same time. Starting with American legislators–who said they are trying to push through the development of gas export facilities here.

The U.S. House of Representatives passed a bill that would speed up permitting of new LNG export projects. Requiring the Department of Energy to make a decision on LNG export applications within 30 days of receiving such proposals.

Later in the week, LNG hopeful British Columbia followed suit. Unveiling a slate of incentives to help LNG projects in the province with costs and permitting.

The government said that it has allowed existing LNG export operations at Delta, B.C. to bypass the need for a “Certificate of Public Convenience and Necessity”. A regulatory document that would normally be required for an expansion planned here by operators FortisBC.

The move greatly streamlines the permitting process for the expanded project. And the government is also moving to help such facilities procure the gas they need.

Officials said they have also reduced gas pipeline transmission tariffs for the proposed Woodfibre LNG project, at Squamish, B.C. Allowing a rate of around C$0.77 per gigajoule of natgas–about C$0.20 lower than “current industrial rates” in the province.

All of this is good news for North American LNG developers. But the flurry of developments may actually be a signal of things getting desperate for this energy sub-sector.

Even as legislators were passing these new rules, LNG prices in key markets like Asia have been hitting fresh lows. The Japan-Korea marker, for example, plunged to $7.10 per MMBtu last week.

That’s a level we haven’t seen since early 2010. And well below the $20/MMBtu prices that were prevailing here as recently as late 2013.

At today’s prices, LNG shipments from North America to Asia may well be uneconomic. Watch for news on whether proposed export projects will proceed amid such an environment–government incentives or not.

Here’s to timing,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

 

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