Americas News
LNG Development Money Going to Canada, Not U.S.
International energy interests are focusing on Canada, rather than the U.S. for investment in liquefied natural gas (LNG) export projects focused on Asia, Bloomberg reports.
Canada's government has approved twice as much LNG export capacity as the U.S., reflecting a more industry-friendly political environment.
Chevron Corp., which announced last year that a subsidiary would buy 50 percent of a Canadian LNG project, has said it is focusing all its North American LNG development efforts on Canada, and other major energy companies are also looking at terminal projects in western Canada.
"The smart money is going to Canada," said Michelle Foss, chief energy economist at the Center for Energy Economics at the University of Texas' Bureau of Economic Geology.
"They don't have any objections to exporting gas and it's closer to Asia, which cuts down on shipping costs."
Three gas export projects have already received permission to ship LNG from Canada, compared with only one in the U.S., where there is more political pressure to keep gas for domestic use.
In Canada, supply of natural gas outweighs domestic demand enough that there is little opposition to exporting the fuel.
"We have so much gas in relation to what we need," said Canadian Natural Resources Minister Joe Oliver.
"There are estimates that we've got between 100 and 200 years of domestic supply."
However, there are also risks to LNG plants in both Canada and the U.S., since the export terminals can take decades to reach a financial break-even point, leaving them open to threats from changes in demand and international price fluctuations.
Chevron CEO John S. Watson said one key to making Canadian projects successful is multi-decade contracts indexed to crude prices.
International Energy Agency (IEA) analyst Anne-Sophie Corbeau recently noted that such pricing mechanisms are under fire from many Asian LNG customers and that other factors, including the prospect of shale gas production in China, also contribute to uncertainty around Asian LNG demand.
