Blog: B.C. LNG faces tough competition

A federal minister, speaking at the world LNG2023 conference about LNG exports, said that “Canada must keep pace because we cannot afford to fall behind.”

But as Randy Boissonnault, Canada’s tourism minister and associate minister of finance, spoke in Vancouver, there came word of even more competition for Canada’s exports of LNG from the West Coast.

First, the U.S. Energy Information Administration looked at how U.S. LNG exports will increase next year as two export terminals come online:

“We expect U.S. LNG exports to average 12.0 billion cubic feet per day (Bcf/d) in 2023. In 2024, with the two new LNG export projects, we expect LNG exports to increase to 13.3 Bcf/d.”

The coming plants are Golden Pass Trains 1 and 2 (being built at an existing LNG import terminal in Texas that will be converted into an LNG export facility) and Plaquemines LNG Phase 1, in Louisiana.

“We estimate Golden Pass Trains 1 and 2 and Plaquemines Phase 1 will add a total of 2.7 Bcf/d of nominal LNG export capacity, or 3.2 Bcf/d of peak capacity. By the end of 2024, U.S. LNG nominal liquefaction capacity will increase to 14.1 Bcf/d and peak capacity to 17.0 Bcf/d across the nine U.S. LNG export facilities.”

And beyond those nine U.S. LNG-for-export plants, seven more are under construction, and 28 further ones are in various stages of proposal, planning, development, or working toward capacity and financial commitments.

We can note that B.C. will still enjoy an advantage: The delivery time for LNG cargoes to Asia is seven to nine days for Western Canadian producers. For producers on the US Gulf Coast it is 21-27 days. They thus face additional shipping costs, and they face costly Panama Canal fees on top of it.

But Mexico has announced plans to develop eight LNG-for-export terminals that would get U.S. and/or Canadian natural gas via the US.

Four of those plants would be on Mexico’s west coast, and would have lower shipping costs to Asia than Gulf Coast facilities. And they are talking of having lower production costs, so they could find it easier to compete with B.C. plants for Asian customers.

For example:

  • To ship LNG from the Golden Pass plant to South Korea’s big Incheon LNG-import terminal, via the Panama Canal, would mean a sailing time (assuming a carrier speed of 20 knots on the open ocean) of almost 21 days. Plus a one-way Panama Canal fee that could exceed $800,000 (Canadian) in 2025.
  • The planned Mexico Pacific LNG plant, on the east coast of Mexico’s Gulf of California, would mean a voyage of 14 days to Incheon.
  • To ship from Mexico’s Costa Azul LNG project, under construction on the west coast of Baja California, would involve a voyage of 12 days to Incheon.
  • To ship from LNG Canada at Kitimat to Incheon would mean a sailing time of just under 10 days.

But, again, Mexico is talking of having lower production costs; if so, its LNG could then be cheaper than ours. (Still, we do have some edge due to our cooler climate here.)

The Costa Azul project (Sempra LNG and Infraestructura Energetica Nova) is under construction north of Ensenada, on the west coast of Baja California. It’s expected to go into production in late 2024.

It is to begin with one production train, which could initially produce some 2.5 million tonnes of LNG a year. But proposed expansion would add approximately 12 million tonnes of export capacity.

And it already has 20-year sales and purchase agreements with Japan’s Mitsui and France’s TotalEnergies.

Mexico Pacific now has been promised strong national and state government support for its Saguaro Energia project on the Sonora coast.

The US$14-billion project will produce 15 million tonnes a year from three production trains. Expansion to double its output is also in development.

The first round of completion in 2026 will  coincide with the start of a long-term contract contract to supply Shell with 2.6 million tonnes a year from 2026 through to 2045.

The project also has an agreement to provide two million tonnes a year to China’s Guangzhou Development, also from 2026 to 2045.

Minister Boissonnault said at the conference in Vancouver that “the development of an at-scale LNG economy is a strategic priority for Canada.”

He added: “The world’s major economies are moving at an unprecedented rate and pace to fight climate change, retool their economies and build the net-zero industries of tomorrow.

“Canada must keep pace because we cannot afford to fall behind – that is why the development of an at-scale LNG economy is a strategic priority for Canada. . . .

““The fact is, we are facing a changing climate, and to use a very Canadian statement, we must skate to where the puck is going. In this context, Canada is well positioned to be a stable and reliable global supplier of choice.

“We . . . have the ability to produce LNG with the world’s highest environmental standards and lowest emissions.”

Meanwhile, major investments in LNG are being made in the United States, Norway, Qatar, and Saudi Arabia as well as Mexico.

There’s clearly some tough competition out there. . . .

Costa Azul LNG plant

Photo: The Costa Azul plant, Baja California, Mexico

(Posted here 26 July 2023)

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