Canada’s LNG industry has its market place, report says

Prices of liquefied natural gas prices are expected to remain weak until the end of the decade, however, Canadian LNG projects could find their place on the market in the long term. 

Demand for the chilled fuel is expected to grow in the long term, bringing with it the need for new LNG projects to meet the demand, The Conference Board of Canada’s Canadian Industrial Outlook: Canada’s Gas Extraction Industry report shows.

Carlos A. Murillo, economist at The Conference Board of Canada said, “while low prices will challenge the economics of new Canadian LNG projects, the news is not all bad for Canada’s gas extraction industry. New investment will still be needed to meet the world’s long-term demand for natural gas.”

He added that the opportunity cannot be taken for granted as competitiveness and the time to enter the market has to be considered closely if Canada’s LNG projects want to succeed in the growing market.

“Given the current speed of project approval and development, that is not a concern to be taken lightly,” Murillo said.

Speaking of the recent conditional approval of the Pacific NorthWest LNG project, Murillo said that, any additional surge in the industry output resulting from the decision is years away.

Low natural gas prices have affected the Canadian gas extraction industry with pre-tax losses of C$1.6 billion, close to those in 2015 that reached C$1.7 billion, expected for this year.

However, after reaching a cumulative investment of US$200 billion in 2015, the global investment in LNG is forecast to drop 40 percent annually through 2020, dropping as low as US$4 billion.

This is expected to create a gap in new production capacity while the demand for LNG is expected to continue its growth at a rate of 3 percent per year over the next two decades, according to the data from the International Energy Agency. In order to meet the demand, about US$15 billion in annual investment in new facilities would be required over the next two decades, the report shows.

However, Canadian industry will have to face continued decline in exports and rising costs of transportation until LNG becomes a reality.