Recent concerns reported over the buoyancy of global liquefied natural gas (LNG) demand have rightly raised more red flags about the viability of Christy Clark’s optimistic B.C. LNG employment and revenue outlook. But today’s natural gas export alarm bells could be tomorrow’s promise of stronger market demand ahead.
According to a Wood Mackenzie analysis, a saturated market coupled with stagnant natural gas demand is eroding the business fundamentals and long-term economic viability of developing LNG export facilities in Canada and elsewhere around the world. The global energy and commodities analytics company noted that those market conditions have prompted the oil and gas industry to postpone final investment decisions (FIDs) in 45 upstream projects thus far in 2015; however, investors in the LNG sector have not similarly reined in project FIDs significantly. Wood Mackenzie analysts consequently argue that with a “wall of new [LNG] supply” and faltering demand from such key global economic engines as China, “development of even half of this proposed supply could prolong the Asian oversupply to 2025.”
However, global energy market investment is a long-term proposition.
A recent International Energy Agency (IEA) natural gas outlook pointed out that, while global demand for natural gas in 2014 decreased slightly year-on-year compared with 2013, it remained close to 3.5 trillion cubic metres.
The IEA also noted that demand has dropped in some countries but has risen significantly in others.
The lower carbon footprint of natural gas versus coal and other fossil fuels continues to bode well for the long-term growth in LNG demand.
There are many valid concerns about that demand that will play a part in negotiations between the provincial government and LNG export terminal proponents, but the long-term future of natural gas as a major global energy source remains bright.
Allowing short-term thinking based on marketplace emotions and political expediency to dictate LNG development decisions today will short-change the province and its residents tomorrow.
