In this Friday, Dec. 7, 2018 photo, construction continues on large-sized liquefied natural gas (LNG) carriers at the Daewoo Shipbuilding and Marine Engineering facility in Geoje Island, South Korea. More than half of the 35 vessels scheduled for delivery in 2018 were LNG carriers. A similar number of vessels are lined up for completion in 2019. (AP Photo/Ahn Young-joon)

Global LNG terminal survey casts doubt on industry as ‘safe bet’

The failure rate for proposed LNG export terminal projects between 2014 and 2020 is 61 per cent, study says

  • Jul. 7, 2020 12:40 p.m.

By Carl Meyer, Local Journalism Initiative Reporter, National Observer

A new report is raising questions about the long-term viability of the liquefied natural gas export industry around the world as the Trudeau government continues to signal support for one such project in B.C.

The natural gas industry is facing multiple headwinds, from a collapse in demand due to COVID-19 disruptions, to competition from renewable energy sources, and protests against fossil fuel expansion such as those in support of Wet’suwet’en against the Coastal GasLink pipeline through B.C.

A global survey of LNG terminals released Monday by the San Francisco-based Global Energy Monitor research network outlines the central risk facing the hundreds of billions of dollars in sunk investments in LNG infrastructure: That some of these structures could become underused, or stranded, long before the end of their useful lives.

“LNG was once considered a safe bet for investors,” said research analyst Greig Aitken, one of the report’s five authors. “Suddenly, the industry is beset with problems.”

The survey points out that Warren Buffett’s investment company, Berkshire Hathaway, yanked a $4-billion investment this March in a key LNG plant in Quebec called Energie Saguenay.

In media reports, the company backing the project, GNL Quebec, cited the “current Canadian political context,” including “instability” from the rail blockades set up in support of Wet’suwet’en, as an explanation.

“The story of Berkshire Hathaway’s change of heart on LNG begins in British Columbia,” reads the survey, titled “Gas Bubble 2020.”

The survey also refers to several other LNG terminal projects in Canada that have either been abandoned or are seeing delays, investment pullouts or no obvious progress in years.

This includes the cancellations of the proposed Aurora LNG plant and the Pacific NorthWest LNG plant near Prince Rupert, and the Malahat LNG project in the Saanich Inlet in 2017, as well as the Grassy Point LNG project on the North Coast of B.C. in 2018.

Another five projects have seen “no progress” in years, while three more are either delayed or have seen a work stoppage, the survey found. Globally, it said some projects that haven’t yet broke ground for construction are now experiencing a “widespread pullback” in enthusiasm.

The Trudeau government has supported the construction of LNG Canada, a $40-billion LNG facility being built in Kitimat, B.C., to be fed by fracked gas delivered by Coastal GasLink. The project, which would liquefy the gas and then load it on ships to be exported to Asia, received $275 million in federal contributions.

Natural Resources Minister Seamus O’Regan has described that money as a “generational investment” that will help “create the future.” In Parliament, O’Regan said the project would create “hundreds of millions of dollars in construction contracts for Indigenous businesses,” while “helping to reduce coal plant emissions in Asian markets.”

In March, National Observer reported that this claim — that shipping the product to China to displace coal-fired electricity generation there would reduce carbon pollution by “60 to 90 million tonnes annually” — stemmed from a “theoretical” calculation made by an adviser hired by LNG Canada, and that didn’t take real-world factors into account.

A report released last month by sustainable development consulting firm Horizon Advisors argued that a Canadian Crown corporation’s support for the Coastal GasLink pipeline was undermining the country’s own climate goals of cutting carbon pollution 30 per cent below 2005 levels by 2030 and reaching “net-zero” pollution by 2050.

A spokesperson for LNG Canada said its joint venture participants “took a long-term view when they made the decision to proceed with LNG Canada understanding very well long-term LNG demand growth to support decarbonization from coal fired electricity, industrial and residential heating and to provide baseload power for renewable power.”

The commitment to the project by the joint venture participants, which are British-Dutch firm Shell, Malaysia’s Petronas, Japan’s Mitsubishi, PetroChina and the Korea Gas Corporation, “has not wavered” said the spokesperson.

National Observer asked O’Regan’s office whether the survey’s results changed the minister’s stance on the industry in Canada. The office could not offer a response before publication.

Over the last year, the amount of LNG terminal capacity under construction around the world jumped from $82 billion US to $196 billion US, according to the survey. This is due to an anticipated surge in demand for natural gas from places like China, Japan, Europe and Southeast Asia.

But the economic atmosphere that led to these massive investments is running up against “climate and economic reality,” the survey states. “Even before the twin shocks of the COVID-19 pandemic and global gas price collapse, LNG projects were facing an increasingly difficult economic environment,” it said.

Gas markets were becoming oversupplied, prices were falling, and renewables, bolstered by better battery technology, were becoming more competitive. With the added drop in demand and worksite restrictions from COVID-19 this year, not to mention public opposition, some companies have reconsidered investment decisions.

Worldwide, the failure rate for proposed LNG export terminal projects between 2014 and 2020 is 61 per cent, the survey calculated.

Last month LNG Canada and other energy firms launched the Canadian LNG Alliance, to “reflect the critical role LNG has to play in Canada’s COVID-19 economic recovery,” as well as “economic reconciliation” with Indigenous peoples and Canada’s “clean energy transition.”

The group argued that LNG projects in British Columbia would produce “among the world’s lowest-emissions intensity LNG” as they would be partly powered by hydro-electric power.

But the survey suggests that the reputation of LNG as an “environmentally benign” fuel that is less dirty than coal has been debunked by scientific studies highlighting the serious impact of methane on global warming.

Methane, a greenhouse gas that is the main component of natural gas, is 86 times as powerful as carbon dioxide in trapping heat in the atmosphere over a 20-year period. Scientific studies have connected a rise in global methane levels with the fracking boom, and say this rise in atmospheric methane is undercutting efforts to hold the global temperature rise to 2C above pre-industrial levels.

A 2017 peer-reviewed study in the journal Atmospheric Chemistry and Physics found that methane leaks from B.C.’s oil and gas industry were at least two and a half times higher than provincial estimates.

Like us on Facebook and follow us on Twitter.

Want to support local journalism? Make a donation here.

LNG

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

BC Ferries’ Northern Expedition holding in Port Hardy while technicians repair the S-radar. The sailing was delayed by two days, leaving passengers stranded. (Zoe Ducklow photo)
Northern Expedition rescheduled to sail for Bella Bella, Prince Rupert after mechanical issues

The S-radar malfunctioned twice, causing a two-day delay in Port Hardy

The River Forecast Centre is maintaining a flood watch for the area, including the Bella Coola River and tributaries, Kingcome River, Owikeeno-Rivers Inlet, and surrounding areas.
Wuikinuxv under evacuation order, more rain in forecast

Bella Coola’s Hill has re-opened but road conditions are muddy and wet

One person was killed in a two-vehicle crash south of Williams Lake on Highway 97 Wednesday, Oct. 28, 2020. (Photo submitted)
Highway 97 crash south of Williams Lake claims one life

Road conditions at the time were slippery and covered with slush: RCMP

Highway 20 is closed from the top Avalanche gate to the bottom Avalanche gate as of 19:30 on Tuesday October 27, 2020 (WL Tribune photo)
Rockslide closes the Hill as rain pours down in Bella Coola

Bad weather has resulted in rockfall on the Hill on Highway 20

The River Forecast Centre is issuing a Flood Watch for the Central Coast including Bella Coola River (file photo)
Flood watch issued for Bella Coola River

The River Forecast Centre is issuing a Flood Watch for the Bella Coola River

Physical distancing signs are a common sight in B.C. stores and businesses. THE CANADIAN PRESS
272 more COVID-19 cases for B.C., outbreak at oil sands project

Three new health care outbreaks, three declared over

This house at 414 Royal Ave. became notorious for its residents’ and visitors’ penchant for attracting police. It was also the site of a gruesome torture in August 2018. It was demolished in 2019. KTW
6-year sentence for Kamloops man who helped carve ‘rat’ into flesh of fellow gang member

Ricky Dennis was one of three men involved in the August 2018 attack

Cpl. Nathan Berze, media officer for the Mission RCMP, giving an update on the investigation at 11:30 a.m., Oct. 30. Patrick Penner photo.
VIDEO: Prisoner convicted of first-degree murder still at large from Mission Institution

When 10 p.m. count was conducted, staff discovered Roderick Muchikekwanape had disappeared

BC Ferries lower car deck. (Zoe Ducklow photo)
Northern Expedition ferry holding in Port Hardy

Radar issues caused the ferry to turn around

Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

Among the pumpkin carvings created this year by Rick Chong of Abbotsford is this tribute to fallen officer Cont. Allan Young.
Abbotsford pumpkin carver’s creations include fallen police officer

Rick Chong carves and displays 30 pumpkins every year

An online fundraising campaign in support of the six-year-old boy, Edgar Colby, who was hit by a car on Range Road Oct. 25 has raised more than $62,000 in a day. (Submitted)
$62K raised in 1 day for boy in coma at BC Children’s after being hit by vehicle in Yukon

The boy’s aunt says the family is “very grateful” for the support they’ve received from the community

Health care employees take extensive precautions when working with people infected or suspected of having COVID-19. THE CANADIAN PRESS/Chris Young
WorkSafeBC disallows majority of COVID-19 job injury claims

Health care, social services employees filing the most claims

Most Read