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Hoped-for LNG boom in B.C. a pipe dream: economist

International gas consortium hits the brakes on B.C. final investment decision until markets improve, but a top Texas analyst is less optimistic for province.

Natural gas is burned off in the background as Premier Christy Clark visits the Encana compressor site in Dawson Creek, B.C. in this 2013 file photo.

Jonathan Hayward/The Canadian Press

Natural gas is burned off in the background as Premier Christy Clark visits the Encana compressor site in Dawson Creek, B.C. in this 2013 file photo.

The international consortium behind a massive would-be liquefied natural gas project in B.C. has hit the brakes on making any final investment decision, announcing a delay until global markets improve.

LNG Canada — a partnership of Royal Dutch Shell, Korea Gas, Mitsubishi and PetroChina — made the announcement Monday, throwing more cold water onto the B.C. government’s hopes to complete such a deal before next year’s provincial election.

The BC Liberals made a massive LNG jobs boom a central plank of their 2013 election campaign. In an earlier interview, Clark said the “market is terrible right now,” but said a final decision on at least one project remained her hope.

“We hope that we will get to a final investment decision — that one of them will — before the next election,” the Premier said in a Metro editorial interview June 27. “That's an important milestone, but things are still happening and thousands of people have been employed as a result of the work that's been going on. Whether or not we get to that before the election, I think we will get to it.

“And we haven't seen any of these projects get stopped, so that's good.”

But such hopes are simply not realistic, according to Kenneth Medlock, Baker Fellow in Energy and Resource Economics at Rice University.

“B.C. LNG faces multiple issues, so to focus on the current market situation is a little myopic,” the Houston-based senior director of the Center for Energy Studies, told Metro. “For B.C. LNG, you’re last in the pecking order there.”

Even if oil and gas prices recover from their current collapse, “headwinds” include competing with Russian gas pipelines, the growth of renewable energy in China, and massive U.S. production.

It’s the “upfront capital expense” that puts B.C. in an unattractive light for investors, he argued, not just current prices. Only one scenario would see B.C. build one single project, he argued — if global demand suddenly accelerated “dramatically.”

“Then I could imagine a situation where one B.C. LNG project might look viable,” he said. “But if the demand is gradual — and you can anticipate that — there are lots of other projects much more attractive than something in B.C.”

Medlock also questioned Clark’s statement to Metro that, “We’ve seen $20 billion spent so far, so there's been a lot of work that's happened in terms of all the survey work, all the land-clearing work — $20 billion is a lot.”

“Wow, that seems too big,” he reacted, “way too high. It’s hardly a $20-billion price tag to construct an entire terminal.”

Meanwhile, the New Democrats provided Metro with documents they obtained through Freedom of Information, in which the Natural Gas Development Ministry’s senior public affairs officer emailed staffers in late 2015 seeking any positive news about LNG.

In a Nov. 30, 2015 email titled “Anything to announce,” Darren Beaupre asked, “Are you able to canvas key people within LNG (task force) and see if any ministry projects/developments could warrant a public announcement (news release or otherwise) over next month or so?"

Less than an hour later, he followed up with an email adding: “Anything that signifies completed work by ministry that helps LNG move forward.”

Policy and decision support director Kursti Calder replied: "I am not aware of any — do you have anything."

According to Green Party of B.C. leader Andrew Weaver, the government’s natural gas hopes have created a “very, very fragile economy” in the province.

“We’ve had a government that has fixated itself on a hypothetical LNG industry that is neither here nor will it come any time soon,” the Oak Bay-Gordon Head MLA told Metro in an interview. “We’re training all these people for LNG, and it’s not going to happen … It was not economically viable, and it won’t be any time soon.”

With files from the Canadian Press.

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