Canada, Australia square off in LNG battle

Both countries advance big plans, face similar challenges

July 13, 2012

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As companies like Apache Canada Ltd. and Shell Canada ltd. busily advance projects to export liquefied natural gas (LNG) to Pacific Rim markets from British Columbia’s west coast, Australia is often cited as Canada’s main competition in the fight for Asian market share.

Such analysis overstates Canada’s standing as an LNG exporter – it has yet to export a single tonne of LNG. Australia, on the other hand, has been exporting the supercooled fossil fuel to Asian customers for more than 20 years. And by 2018 its LNG production capacity is set to exceed that of the world’s current LNG exporting heavyweight – Qatar.



There are currently four LNG export projects on the books, three of them slated to be built near Kitimat, B.C. and the fourth likely to be built near the Kitimat port as well. The total planned capacity of the four projects is 26.2 million tonnes annually. Australia already has two LNG projects operating – North West Shelf and Darwin LNG – that exported 20 million tonnes of the stuff in 2011. New York-based
Bernstein Research lists 23 more projects in various stages of development representing an additional 139 million tonnes annually of LNG supply.
There is a great deal of LNG investment planned for B.C.’s west coast. But exactly how many billions will be spent there is unclear. The only project that has released an estimated cost is Apache Canada’s Kitimat LNG at $4.5 billion, although various media reports say Shell Canada’s project could exceed $12 billion. Planned investment in Aussie LNG projects dwarfs what is in store for Canada. Bernstein Research pegs the total at US$170 billion over the next five years. These projects aren’t cheap – the Pluto LNG project headed up by
Woodside Energy Ltd., which is slated to come online in 2012, cost US$14 billion.
It requires sizeable resources to keep LNG export terminals filled. But two tight gas plays in northeastern B.C. appear to have the goods. The National Energy Board says marketable natural gas in the Horn River basin is 72 trillion cubic feet (tcf). The Canadian Society of Unconventional Resources estimates the Montney may hold 250 tcf. Australia also has gobs of natural gas. Government figures say Australia has 135 trillion cubic feet (tcf) of “economic” natural gas reserves. Bernstein Research’s tally is much bigger at 392 tcf – although it doesn’t say how much of that total may or may not be economic to produce.
Labor availability and time are threats to industry’s LNG export schemes. With the oil sands sucking up skilled labor in Western Canada, finding the workers to build LNG mega-projects will be difficult. Another challenge: Can these projects be built before Australian, American and African LNG projects eat away at Asian market share? Labor shortages are acute in Australia as well. Other challenges include project cost overruns that Bernstein Research says typically reach 30 per cent. Environmental concerns could scupper LNG projects dependent on coal seam gas supplies as feedstock for the terminals.

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