The announcement comes amid long-standing frustrations among those who want to see Canadian natural gas reach new international markets with an LNG export industry, which has failed to materialize.
Jeremy McCrea, an analyst with Raymond James, called the signal from India’s government a “slightly encouraging sign” for one proposed export terminal on British Columbia’s coast, but noted the industry has been fraught with uncertainty.
“There’s a lot of us in the industry that continue to be hopeful,” McCrea said. “But there’s just been frustration over delays.”
The state-owned Indian Oil Corp. and two partners are building the terminal at India’s Dhamra port to bring in LNG from overseas markets and process it into gas to meet domestic demand.
It would import about five million tonnes of LNG — roughly the equivalent of 240 billion cubic feet of natural gas — each year when it’s commissioned, expected by 2021.
Dharmendra Pradhan, India’s minister of state for petroleum and natural gas, told thousands of people gathered at an announcement this month that the terminal would import LNG from Qatar, United States, Iran and Canada.
Pradhan didn’t name the Canadian project that would export the LNG, but Indian Oil owns a 10 per cent stake in Pacific Northwest LNG, a proposed terminal on B.C.’s coast led by Malaysia’s Petronas.
The consortium behind the $36-billion terminal announced in June it was satisfied with the technical and commercial components of the project, and would sanction an investment as long as two conditions are met.
It’s looking for approval of a project development agreement with the B.C. government — now led by an NDP-Green alliance — and a green light on a federal environmental review.
Pacific Northwest declined to comment on whether it has agreements in place to ship LNG to the Indian terminal.
The only Canadian LNG facility that has been sanctioned by proponents to move ahead is Woodfibre LNG, among the smallest projects with a 40-year licence to export up to 2.1 million tonnes a year, or 300 million cubic feet per day.
Woodfibre could not be reached for comment Tuesday.
Liquefying natural gas, which involves cooling it to extremely low temperatures, enables shippers to transport the fuel by tanker to new markets overseas.
Eighteen LNG terminals have been proposed for B.C.’s coast, but none have been built. Global prices have fallen, while companies in Australia and the United States have been quicker to approve and build new terminals.
In a report released Tuesday, the National Energy Board said Canada has several advantages in entering global LNG markets, including a large domestic supply of natural gas. The proposed B.C. projects are also closer to energy-hungry Asian markets than U.S. terminals under construction on the Gulf and East Coasts.
But the report notes low natural gas prices and ample supplies have made it difficult for Canadian projects to secure long-term contracts with customers, considered important in financing multibillion-dollar investments in new terminals.
McCrea of Raymond James said Petronas “doesn’t appear to have any immediate plans” to begin construction, given that it has dramatically slowed down the pace of licensing new natural gas wells that would feed into the proposed terminal.
Still, he said indications from India’s government that Canada will be a source of LNG imports is a “slightly encouraging sign that maybe the project has more life to it than more industry pundits would believe.”
Source Link – Calgary Herald