Motherlode or Fools Gold ? 2 Things that will have you questioning the push for BC LNG

With Wetʼsuwetʼen supporter blockades and demonstrations ongoing, no one can miss the barrage of pro LNG industry advertising popping up everywhere heavily promoting Coastal GasLinks natural gas pipeline.

The Coastal GasLink pipeline begins in BC, ends in BC and if finished will transport natural gas to LNG Canada’s plant when its completed in approximately 2025. Industry groups and Premier Horgan have both said this project is critical for British Columbians and will bring prosperity and revenue into provincial coffers for decades. 

For the average, non political person, these ads – viewed without knowledge of global LNG market problems or how subsidized the industry is – do make it sound like the motherlode of all opportunities for BC.

But a deeper look at some industry reports I came across recently, really has me shaking my head at the public relations campaigns from the BC LNG Alliance and Resource Works. Even industry reports are transparent about the need for subsidies to even make LNG happen in BC.

This all won’t be sexy info for most people, admittedly. But British Columbians are on the hook for a lot when it comes to  LNG. And they should be asking why.

It’s of no news to anyone, least of all John Horgan, that the spot price of LNG right now is at a historical low.  There has been a glut of LNG flooding the market for some time, and due to a warmer winter than normal and China’s Covid-19 outbreak, it’s a bit of a nightmare for LNG exports right now. 

Prices are sitting around the $3.00 US per mmBTU in Asia, down from $20 six years ago. 

However alarming that is for gas producers, it isn’t the current price of LNG we need to worry about. LNG Canada’s plant won’t open until 2025, so it is the price of LNG in 2025 that analysts look towards as one factor in viability.

This is where it gets interesting. One would think that with LNG prices at rock bottom prices, there would be no where to go but up, and those with skin in the game will do anything to make you believe it will . After all, their jobs depend on it, to be blunt.

 

But a new report indicates the opposite in fact, that another glut in a few years will ensure prices stay low: 

…But while the glut is set to come to an end, which should lift rock-bottom spot prices, the race to give the green light for new projects has intensified, the analysts said. The winners in the next race would be low-cost producers with clear funding plans and some LNG service companies.

“Competition to sanction the next wave of LNG projects has intensified risking another glut in the mid-2020s,” Bernstein said.”The seeds of the next cycle are already being planted.”

“With a further 110 million tonnes per annum of potential projects the competition for market space will be intense,” Bernstein said.

That article should be read in full as it details other projects coming online mid 2020’s when LNG  Canada will be online.

This anticipated future glut is a big reason Chevron is trying to shed its stake in Kitimat LNG, the other potential LNG plant on tap for Northern BC. 

Now, the likelihood of another LNG glut in the global market in the mid 2020’s could spell disaster for the LNG Canada partners…or spell disaster for the provincial and federal governments. Let me tell you why.

The Canadian Energy Research Institute issued a report July 2018, on the viability of LNG in Canada, West coast potential projects versus East coast projects.  You can read the full report here: https://ceri.ca/assets/files/Study_172_Full_Report.pdf

From the report:

The cost competitiveness of an LNG plant is in relation to the destination markets. A project with
certain supply costs and transportation costs needs to ensure that the price offered at the
destination market over 20-years will cover those costs. Otherwise, the LNG owners risk a loss.
In this section, the landed costs of LNG in Canada and competing jurisdictions are compared with
prices at the destination markets. Further, the section presents ways to improve cost competitiveness for Canadian projects. ** note, improving cost competiveness = more government subsidies, LY**

Key observations:
1. Western Canada and Eastern Canada LNG landed costs are more expensive than the
current spot price in Japan (for Eastern Canada LNG, northeast Asia is not a priority
market). The difference between Western Canada LNG landed costs and spot price is
$0.80 at the time of writing (May 2018). ** spot price at the time of this report was $8.20..its sitting far lower now at $3.00ish**LY
2. Under an oil-linked contract ( which many Asian buyers prefer), a Western Canada LNG project will need an oil price of
approximately $80 or higher over the life of the project to break-even (contract price is
assumed at 11.5% of Brent contract; break-even costs include a return to investors).
3. The total liquefaction costs of Western Canada LNG (all costs except for natural gas) are
higher than for the US GoM-based project.

Do you see the issue now? These calculations for viability,while approximates, actually included the provincial governments ‘incentives’ aka subsidies, at an LNG price that was much higher than it is now.

The report mentions how governments could make it more competitive by offering more incentives. (I recently explored the amount of lobbying going on by CAPP and other industry groups here : https://lailayuile.com/2020/01/29/lng-lobbyists-policy-why-big-money-is-still-a-very-big-problem-in-bc-politics/ )

The questions surrounding the economics alone are unsettling. BC LNG projects require much higher LNG prices AND an oil price $80 just to break even. To make a profit it would have to be even higher.

This is why those LNG lobbyists are all busy lobbying right now. They want better policy for them and more subsidies to ensure the industry can make money.

It’s even been questioned why LNG Canada would even go ahead with such challenges. Some analysts speculate it’s just a way for LNG Canadas partners to lock down a dedicated gas supply for 40 years. Pretty much on BC taxpayers dime.

Marc Lee touches on this in his dissection of the LNG subsidies given by our current government. I suggest you read it if you haven’t. https://www.policyalternatives.ca/sites/default/files/uploads/publications/BC%20Office/2019/05/CCPA_BC%20Critiquing%20the%20LNG%20Canada%20agreement_FINAL_190506.pdf

Further food for thought on the challenging economics and viability of LNG can be found here, in this Oxford Energy Study: https://www.oxfordenergy.org/wpcms/wp-content/uploads/2019/10/Challenges-to-the-Future-of-LNG-NG-152.pdf?v=3e8d115eb4b3

One thing before I go. Boosters keep pushing the save China from air pollution and coal line. Frankly, it’s bunk. Yes, LNG is used overseas and it will continue to be. But coal is very cheap right now and will be used heavily for years to come. Right now Japan is racing to build new coal plants, despite knowing how environmentally unsound it is. https://www.nytimes.com/2020/02/03/climate/japan-coal-fukushima.html

And China is not only building more coal plants, it is also financing others in less developed countries who can’t get financing for them anywhere else. 

Any LNG we produce is not going to displace the impact of all these new coal plants overseas.

Now we are in a spot where the ndp government has focused so much on one project and industry just like the BC Liberals did, that zero work has been done to diversify and create resilient northern communities that don’t bust when the resource disappears.

A lot can happen in the next few years. Many countries are moving past LNG right to renewables. Investors are wary and just this week the headlines declared worlds top LNG producer is in trouble.

LNG in BC. Is it really the motherlode…or is it just fools gold? Only time will tell.

It’s time for Horgan to tell Coastal Gaslink to use an alternate route to bypass Wet’suwet’en territory.

** updated at the bottom

Article 10 of the UN Declaration on the Rights of Indigenous Peoples states: Indigenous peoples shall not be forcibly removed from their lands or territories. No relocation shall take place without the free, prior and informed consent of the indigenous peoples concerned and after agreement on just and fair compensation and, where possible, with the option of return.

On November 19th, 2019,every party stood in the legislature to applaud as  the BC government adopted legislation to implement and align BC’s laws with UNDRIP.

This….is not that.

20200207_17023720200207_1326013

One month ago today I, along with many others, publicly called for all eyes on Wet’suwet’en in this blog post detailing the ongoing impasse: https://lailayuile.com/2020/01/07/all-eyes-on-wetsuweten/

In this post I explain how the Delgamuukw/Gisday’wa Supreme Court decision made in 1997, acknowledged Indigenous rights and title where no treaty had been signed.

The Delgamuukw case was framed around traditional hereditary leadership.(currently several Wet’suwet’en hereditary chiefs do not consent to Coastal Gaslinks pipeline on the territory)

Delgamuukw is a chief’s name in the Gitxsan Nation, passed down through generations, and Delgamuukw was one of dozens of plaintiffs in the case, composed of hereditary chiefs from both the Gitxsan and Wet’suwet’en Nations.

The lands in question in that landmark case, are the same lands in which these screen captures were taken from a live stream publicly aired today during the ongoing RCMP enforcement of the injunction.

Solidarity rally’s and demonstrations have sprung up all over Canada at times shutting down the Vancouver Port, and rail lines back east.

The BC Ndp caucus response has largely  been to pretend it’s not happening and scheduled two major press conferences two days in a row to distract press and public when the RCMP injunction enforcement began. (Very little news mainstream coverage  was dedicated to the enforcement itself, press didnt seem to get interested until they too were blocked from entry to the legislature)

As I write this, I’m unsure of the status of what’s going on, my info is gleaned from public facebook pages, and the feeds of Ricochet media and Unist’ot’en camp itself, online. There have been arrests today but gate occupants have been peaceful and have asserted many times they have no weapons.

It appears though now, that RCMP have been blocked inside the exclusion zone as detailed by this reporter.

https://mobile.twitter.com/pieglue/status/1225928107971842049

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Premier Horgan made a grave error I believe, not in implementing the UNDRIP legislation, but in then declaring it is forward looking only and doesn’t apply to this project or any other underway.

You cannot have it both ways when some of the hereditary chiefs whose rights and title on this territory has been acknowledged by the Supreme Court of Canada….are now at the mercy of a  BC court ordering them not to impede the pipeline work. On their own territory where permits are still under review!

This is not going to go away, nor should the NDP caucus expect it to.

And it sets an alarming tone in trying to move forward when the expectation is Wet’suwet’en hereditary chiefs who are still opposed, are not important enough to consider as the ones in favour, and a peaceful resolution to government actually just means they agree to allow the pipeline.

Let me state clearly now, that I oppose the expansion of LNG in BC, along with the LNG Canada project. I always have, long before the NDP took power.

I don’t support this pipeline.

I will continue to write about the folly of such focused dedication to this lng industry. I have detailed the faulty economics and environmental issues here so many times, supported by lng future price forecasts in my most recent post.  I even detailed how the seeds for another glut of LNG hitting the market right when LNG Canada opens, are being sown right now..I don’t think this entire project will even be economically feasible when it’s done… if it is even completed: https://lailayuile.com/2020/01/29/lng-lobbyists-policy-why-big-money-is-still-a-very-big-problem-in-bc-politics/

But I can only think of what is happening of the Wet’suwet’en who are opposed , some of whom have high powered tactical rifles pointed at them and their supporters, and how to resolve it.

This government is all in on LNG. They will not stop the project or the pipeline.

Several Wet’suwet’en hereditary chiefs want RCMP and Coastal Gaslink to leave forever.

I believe further talks between the two will be fruitless, personally.

However, early last year,then MP Nathan Cullen suggested an alternate route be taken by Coastal Gaslink around Wet’suwet’en territory.

https://www.terracestandard.com/news/move-natural-gas-pipeline-mp-suggests/

Coastal has already moved a small portion of this pipeline once ( the approved southern route) so clearly it can be done.

Coastal does not want to change the route, but I also know Coastal doesn’t want any more issues. They avoided even discussing further alternate routes with the reporter in the link above.

Instead of sending Cullen to meet with hereditary chiefs knowing full well they will not leave or be bought off, premier Horgan should have called Coastal Gaslink to his table. And it can still be done.

Premier Horgan, you are on the wrong side of history on this issue. Even the BC Federation of Labour is calling for removal of RCMP and new discussions as of an hour ago. https://bcfed.ca/news/statements/bc-federation-labour-statement-situation-wet%E2%80%99suwet%E2%80%99en-territory

You implemented legislation to right wrongs of the past and create a new path forward. Ignoring the SCOC court acknowledged title and rights of the hereditary chiefs is not in the spirit of implementing UNDRIP.

I urge you to immediately call on Coastal Gaslink to use another route. They will whine. They will make excuses why they can’t. But you are the premier and you have an opportunity here to back up your big talk on reconciliation.

The Wet’suwet’en territory will be left untouched.

You will have your economically unviable pipeline.

The nations who have signed agreements must have their deals and benefits protected.

And it will show that you too can reconsider that it is not too late to right a wrong underway.  That is what leadership is all about.

I call on all who support Wet’suwet’en, to join me in this call for Premier Horgan to call on Coastal Gaslink to use  an alternate route.

Call, email, share online. Those with access to the premier, please use your position to urge him to act now.

*This video was shared with me online.  The background: 

” It was written and recorded on unceded Sinixt tum-ula7xw in support of Wet’suwet’en hereditary chiefs protecting their lands. This song is addressing John Horgan, David Eby, RCMP, Coastal Gas Link, TC energy and all others involved in this oppression. We invite you to sit down and listen. This is an appeal for you to really ask yourselves if you feel good about invading Indigenous lands and ripping people from their territories. Is this the legacy you want to leave? Is this the best contribution to the world that you’re capable of making? Will your grandchildren be proud of you?

*** UPDATE Feb 16th, 2020***

Andrew Kurjata of CBC did some digging into alternate routes. His twitter thread  detailing how and what he researched is here:

https://mobile.twitter.com/akurjata/status/1228844031729373191

And his article is here : https://www.cbc.ca/amp/1.5464945?__vfz=medium%3Dsharebar&__twitter_impression=true

Yep. I was right again. They can reroute. They just dont want to.

” To change the route to avoid Wet’suwet’en territory at this date would require major environmental assessment work, which would not be feasible under the timelines to which we have committed….”

Coastal Gaslink does not run this province.  The government is beyond ridiculous trying to get Wet’suwet’en to agree to let the pipeline through instead of telling Coastal Gaslink to reroute. That this government just sided with the company is appalling.

Horgan and Trudeau need to tell Coastal to reroute.

*** update Feb 16, 10 pm.

A significant development..

The Mohawk leader tehonikonrathe says the CN blockade will continue for some time until the Wetsuweten Hereditary Chiefs let them know they have negotiated an agreement or  otherwise state they do not need their support.

A very well spoken man. And seemingly a historic moment.

 

LNG, Lobbyists & policy: Why big money is still a very big problem in BC politics.

Too often government responds to the whispers of lobbyists before the cries of the people.

Andrew Cuomo

Having been a firm critic of fracking and the pursuit of LNG in BC for many more years than the NDP have been in power, I can still recall the time John Horgan said Christy Clark needed to do the LNG math and warned about focusing on LNG too much. Even though he was very open then about being a supporter of LNG, he wasn’t convinced it was prudent to invest so much into it, at the risk of leaving other sectors behind. Even back then he expressed concern about whether or not the world would actually need the supply and criticized the money being invested into communities that may ultimately suffer when the boom goes bust…. 

“Horgan said that while he supports the industry “in principle”, there are many questions that must be answered before the government can claim success. “What are the greenhouse-gas consequences of expanding the industry?” he said. “Will that blow our legislated targets out of the water? Quite possibly.”

~snip~

“Horgan also stated that recent international developments raise doubts about whether liquefied-natural-gas prices will remain high in Asia. According to a recent report by the consulting firm Ernst & Young—which cited Deutsche Bank figures—LNG projects require an Asian price of US$12 to US$13 per million British thermal units (BTU) to be viable.Meanwhile, Russia recently signed a US$400-billion deal to supply China with this fuel for 30 years. According to the financial news service Bloomberg, the negotiated price was US$10.50 to US$11 per million BTU. That’s significantly lower than the Deutsche Bank threshold. Horgan predicted that the Russia-China deal will drive down the LNG price in Asia.As the Straight went to press, LNG was selling at US$15.23 in the world’s largest LNG market, Japan. That’s down from a peak of US$17.20 in June 2012…”

Hmm. So in 2014, LNG projects needed an Asian price of US $12-$13 dollars per BTU to be viable. ( trying to locate a current viability price for comparison, will update when I do )

Whats the Asian price of LNG being paid right now on incoming deliveries? Export plants in Brunei just sold LNG for delivery in March, at a low of $3.90 – $3.95 per BTU… far below the viable price needed to profit given above.

We are sitting at a 10 year low right now, due to a massive glut from so many trying to cash in globally. This has been the case for quite a while, and these low prices and plethora of projects globally, is why Horgan doubled down on the subsidies. Without extensive credits and breaks, LNG Canada wouldn’t have invested at all because the industry just isn’t profitable in BC unless its subsidized heavily.

That’s a fact. Here is an excellent, factual analysis of those subsidies: https://www.policyalternatives.ca/sites/default/files/uploads/publications/BC%20Office/2019/05/CCPA_BC%20Critiquing%20the%20LNG%20Canada%20agreement_FINAL_190506.pdf

The only people heralding the prosperity and opportunities LNG in BC will bring, along with how it will save the world, are those with skin in the game who will benefit: the various LNG alliances, CAPP and all the elected politicians who carry on with this facade as if some of us can’t read or understand financial reports and analyst forecasts.

And to be fair, most don’t read these things and just blindly digest whatever sugar coating is fed to them. Because both the NDP and the BC Liberals are in support of all this, supporters of either don’t engage on the subject, nor will they criticize even when they agree with what I am saying.

It’s all so oddly silent and shameful to watch and I often wonder what Rafe Mair would say about this all. He had colourful but accurate comments about CAPP and the big papers in BC..😂

But I digress. Lets get back to the all the pro LNG boosters who have invested so much into forcing this industry in BC, who won’t talk about things like this: Seeds of next LNG glut already being sown. 

“But while the current glut is set to come to an end, which should lift rock-bottom spot prices, the race to give the green light for new projects has intensified, the analysts said. The winners in the next race would be low-cost producers with clear funding plans and some LNG service companies.

“Competition to sanction the next wave of LNG projects has intensified risking another glut in the mid-2020s,” Bernstein said.”The seeds of the next cycle are already being planted.”

After a series of final investment decisions over the last 12 to 18 months, Bernstein expects a further 70 million tonnes a year of LNG projects to get the green light for construction over the next 18 months.

The bottom line for LNG investors is profit. Let’s be real, there is nothing altruistic about the pursuit of these projects, no matter how much proponents try to paint them green and clean. Analysts have been predicting for a while, that low LNG prices will force many producers to shut down : https://www.afr.com/companies/energy/lng-glut-to-force-us-shutdowns-fesharaki-20191212-p53j8u

Which is why the recent news that Chevron is selling their stake in Kitimat LNG and cutting funding to the other LNG investments is no surprise to anyone who has followed global forecasts. https://canada.chevron.com/our-businesses/kitimat-lng-project

While politicians continue to pretend all is well and that this is an amazing opportunity for prosperity for BC, a new report taking the shipping and cruise line world by storm this week, shows that LNG is worse than what is being used now, for climate change. This report detailed by Hellenic Shipping News gives all the details: https://www.hellenicshippingnews.com/liquefied-natural-gas-as-marine-fuel-revealed-to-be-worse-than-business-as-usual-for-the-climate/

A new report from the International Council on Clean Transportation (ICCT) has found that the most popular Liquefied Natural Gas (LNG) ship engine, particularly for cruise ships, emits between 70% and 82% more life-cycle greenhouse gas (GHG) emissions over the short-term compared to clean distillate fuels. The shocking new report, “The climate implications of using LNG as a marine fuel”, comes as the shipping sector grapples with its enormous climate footprint, and more ship operators are turning to LNG as a purported climate solution.

Read the report: https://www.stand.earth/publication/climate-implications-using-lng-marine-fuel-international-council-clean-transportation

The ICCT report examines the lifecycle GHG emissions from marine fuels, including a previously poorly understood source of climate emissions from LNG-powered ships — the unintentional releases of the climate super-pollutant methane from ship engines, known as methane slip. The authors found that using LNG could actually worsen the shipping industry’s climate impacts compared to marine gas oil (MGO) when considering the amount of heat these emissions will trap over a 20-year period.

Isn’t that something? This is called unintended consequences perhaps, and kind of really puts a damper on efforts to promote clean BC LNG for shipping. You can’t claim its clean when its being used in an engine that increases emissions.  (Which engines are those BC ferries using? )

Which makes you wonder about forging ahead with the LNG bunkering, refueling and export plans for LNG happening in the Fraser river on Tilbury Island, along with expansion planned for the port on Roberts Bank. I talked about that a while back in this post: https://lailayuile.com/2019/10/26/saturday-morning-coffee-round-up-election-2019-lng-in-delta-money-laundering-inquiry-stunner/

With so many questions and additional problems relating the governments own reports detailing the lack of science and lack of answers related to fracking, I can surmise the heart of this expansion is jobs.

Since there has been little to no effort being put into other infrastructure projects of any kind up north to provide jobs other than site C, we have continued the same single minded, boom and bust focus Horgan chided  Clark for.  And to what end when respected analysts are already forecasting another LNG glut right for when Canada LNG comes online?

How much will Canadian LNG be selling for overseas, per BTU then? Does anyone ask our politicians these questions? Do they ask themselves these questions? Or do they only look as far as the next election?

It’s one helluva financial gamble, by any perspective, and with Chevrons sale  and decision to stop funding Kitimat LNG, the writing is on the wall, in my opinion.

Which brings me to the lobbyists. Yes, big money is still impacting BC politics, thanks to industry groups with deep pockets wanting to impact and influence policy decisions in the province. And while some register to lobby politicians, savvy lobbyists often register to lobby deputy ministers and staffers who are more directly involved in policy making.

I would love to show you all the screenshots of all the lobbying going on relating to LNG, but it’s just way too much to show you individually. I would suggest you head over to the Lobbyist registry & search the following items separately: LNG & Site C. This is the link, click on public access https://justice.gov.bc.ca/lra/

What you will find are lists of oil and gas associations, resource companies and others who all want to talk to ministers, staffers and deputy ministers about their goals. Some of those goals include ensuring the industry remains competitive, incentives to encourage electrification of the gas industry ( read bigger subsidies via lower hydro rates) policy changes that promote LNG, promote the oil and gas sector, etc etc etc…. CAPP alone has an extensive list of registrations with other industry partners on that aspect alone.

I see a lot of complaining online about activists by pro resource groups and people. Those damn activists, put them all in jail, they cry.

But they never complain about how deep industry pockets get direct access to government officials and staff. That kind of influence is apparently ok…when its industry. If we started raising cash to access government officials directly you can bet industry would be screaming loudly.

No one tells the public what the final result was or if the lobbying was successful.

We don’t know who actually motivated policy changes. I do know that in the Ministry of mines and energy, at least one high level staffer has helped direct policy through successive governments for both hydro and resources. That same person is being actively lobbied right now.

What I do know is you and I do not have that kind of elite access. Which is why activism exists. And it works well as we have seen with the recent announcement from Blackrock -worlds largest investment manager – that it will avoid fossil fuel investments that have a high sustainability related risk.  https://www.cnbc.com/2020/01/16/activists-respond-to-blackrocks-plan-to-tackle-climate-change.html 

BlackRock, the world’s largest money manager with nearly $7 trillion assets under management, will begin to exit investments in coal production, introduce funds that ban fossil-fuel stocks and vote against corporate managers who aren’t making progress on fighting climate change.

“Awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance,” Fink wrote in the annual letter to company executives. “The evidence on climate risk is compelling investors to reassess core assumptions about modern finance

Oh, is that another thing industry and government didn’t tell you? Imagine that. I can’t imagine why…

When a photo says all you need to say….

As you likely know, Horgan did a minor shuffle….Michelle Mungall has been demoted as Minister of  Site C, Fracking & LNG and is now the Minister of Jobs, Jobs and more Jobs. Bruce Ralston takes over her spot in the infamously contentious file.

This is Mungall during her swearing in. 😉

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