Globe and Mail: Will Asian gas deal quash Canada’s LNG export hopes?

A massive natural gas agreement between Asian superpowers may have just pulled the proverbial rug out from under Canada’s hopes to become a major exporter of Liquefied Natural Gas. The deal underscores one of the risks of playing in the global energy game–the goal posts can suddenly move just when you’re ready to kick the ball.

In the LNG business, global trade flows are driven by prices or, more precisely, price differentials between where natural gas is produced and where it’s sold. British Columbia’s plans to become a big natural gas exporter hinge on the wide disparity between Asian and North American prices. In Asia at the moment, natural gas is selling for upwards of $15 per thousand cubic feet. On this side of the Pacific the cost is around $4.50 per mcf. Getting that gas from here to there is tricky, but it’s easy to see how much money there is to be made if you can pull it off.

Of course, the rest of the energy world isn’t exactly going to sit still while you get your plans together. Last decade, Quebec City found that out first hand when its plans to import LNG from Russia through a regasification terminal were scuttled after North American natural gas prices crashed. The emergence of shale gas drilling and the ensuing spike in production made those hopes obsolete.
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