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)

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

Johnathan Lee Robichaud pleaded guilty to eight charges including sex-related offences against children and accessing, possessing and making or publishing child pornography. (Courtesy of Saanich Police)
Sentencing date moved for Saanich nanny guilty of child porn charges

Johnathon Lee Robichaud pleaded guilty to eight sex offences against children

Patrick MacMullan won $28,000 playing Toto. (Photo courtesy of BCLC)
Greater Victoria man wins $28,000 while watching football

Winning ticket purchased at Colwood convenience store

(File - Sooke News Mirror)
Man exposes himself to woman, children on Sooke trail

Suspect believed to be between 55 and 65 years of age

(Pixabay photo)
Emergency sewer repairs underway on Phillips Road in Sooke

Sewage may have entered DeMamiel Creek and Sooke River

Health Minister Adrian Dix and provincial health officer Dr. Bonnie Henry head for the press theatre at the B.C. legislature for an update on COVID-19, Jan. 7, 2021. (B.C. government)
B.C.’s COVID-19 spread steady with 509 new cases Friday

Hospitalized and critical care cases decline, nine deaths

Dr. Shannon Waters, the medical health officer for the Cowichan Valley Region, is reminding people to stay the course with COVID-19 measures. (File photo)
‘Stay the course’ with COVID measures, Island Health reminds

Limit social activity, wash hands, wear a mask, and isolate if you feel sick

(Black Press Media file photo)
From arts to environment, nominate your West Shore hero

Nominations for the Goldstream Gazette’s Local Hero awards are open to Jan. 15

Cowichan Tribes members line up at a drive-up clinic on Wednesday, Jan. 13 to receive the first doses of the COVID-19 vaccine in the region. (Kevin Rothbauer/Citizen)
BCAFN condems racism against Cowichan Tribes after COVID-19 outbreak

“Any one of us could do everything right and still catch the virus”: Regional Chief Terry Teegee.

Chief public health officer Dr. Theresa Tam provides an update on the COVID-19 pandemic in Ottawa on Friday, Jan. 8, 2021. THE CANADIAN PRESS/Sean Kilpatrick
Canada’s top doctor says to avoid non-essential travel as B.C. explores legal options

Premier John Horgan says he is seeking legal advice on whether it can limit interprovincial travel

The District reopened access to the Sooke Potholes on Friday. (Contributed - Ashley Ensor)
Sooke Potholes reopen after storm

The park was closed on Wednesday after down power lines

Nursing staff at West Coast General Hospital celebrate the announcement of a $6.25-million expansion of the emergency department that will start in March 2021. (File photo)
B.C. health ministry commits $6.25M to hospital expansion in Port Alberni

Plans for larger emergency department have been on hold since 2015

Seasonal influenza vaccine is administered starting each fall in B.C. and around the world. (Langley Advance Times)
After 30,000 tests, influenza nowhere to be found in B.C.

COVID-19 precautions have eliminated seasonal infection

Martin Luther King Jr. addresses the crowd during the march on Washington, D.C., in August of 1963. Courtesy photo
Government reinforces importance of anti-racism act on Black Shirt Day

B.C. Ministers say education “a powerful tool” in the fight for equity and equality

Most Read