It will cost more, anyway

A few notes to file for future reference as the great debate on British Columbia’s fight to become a competitor in the international market for Liquefied Natural Gas continues.
While the Liberal government in BC stresses urgency to build a liquefaction plants and docks to handle giant tankers to ship their product around the world to countries starved for energy, Australia is already out of the gate and reaching for world leadership in LNG exports. It has three plants in production, seven under construction and nearing completion “several other projects under consideration.”
We have yet to build a stable and buy the horses let alone enter the race – and that may be a good thing. The Aussies, although light years ahead of BC in the LNG International stakes, are finding international market demands difficult to balance with the price charged natural gas users, domestic and industrial, at home.
In simple terms LNG is expensive to produce. The main buyers of LNG, China and Japan, like all good shoppers for “must have” products, have market loyalty only for the producer offering the lowest price on long term LNG contracts. Producing nations jockeying for those long term LNG contracts must stay competitive, while nudging up the price of natural gas for at home domestic consumers.
Australia’s North West Shelf Venture started shipping LNG in 1989. Its annual production is now 16.3 million tonnes of LNG. In 2006 Darwin LNG came on line with 3.5 million tonnes a years. A third plant, Pluto, entered the fray two years ago with annual production of 4.3 million tonnes of LNG.
By 2018 it is estimated Australia’s production, with the seven new plants on line, will top 84 million tonnes and place the country among world leaders in exports. When that happens international investors forecast Australia will overtake Qatar as number one in LNG exports.
And there’s the rub, or double rub. The first is the nervous multi-billion dollar investor who can only wait and watch BC and Canada continue to parade their LNG pony with promises of untold wealth for all once it gets into the race for LNG dollars.
The second rub comes with warning signals that while all seems well in Australia as the LNG moneys rolls in, there is a growing problem on the home front. At present Australian manufacturers pay $3 to $4 per gigajoule for natural gas. (A gigajoule is roughly the equivalent of 27 litres of fuel oil; 39 of propane; 26 of gasoline or 277 kilowatt hours of electricity). Chinese and Japanese buyers are happy to pay $18 for the same measure and absorb the cost of reconverting the LNG.
Experts forecast that as the price of LNG continues to increase with supply locked into long term contracts, domestic prices will also rise even as the domestic supply gives way to the richer international, higher priced, product.
In New South Wales where the bulk of Australian domestic users live natural gas prices are expected to top an 18 percent increase this year.
A year ago the Grattan Institute, a think tank similar to BC’s Fraser Institute, forecast Australian household gas bills would increase by around $170 a year for the next several years as a result of the LNG boom. During the past two years household energy costs in Australia have increased threefold and the trend is expected to continue.
And there is very reason to believe a similar pattern will follow in BC if we, courtesy our politicians, get what they wish for.

One comment

  1. You sure have a mind of information, so I know you will recall when Socreds was going to build an LNG Plant in Prince Rupert

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