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Asian buyers want cheaper BC gas | Energy in BC & beyond

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Asian buyers want cheaper BC gas

Asian Pacific Post, 25Sep2013

Premier Christy Clark upcoming 13-day trade mission to China, Korea and Japan to deepen British Columbia’s relationships with those key liquefied natural gas Asian markets will be facing some severe gas pains, industry analysts said.

The Premier-led mission, which will depart Vancouver on Nov. 21 and arrive in Beijing the next day will advance liquefied natural gas (LNG) development opportunities and promote the province as a stable and attractive destination for trade and investment, including the establishment of Asian corporations’ North American headquarters in B.C.

The China program will include meetings and events in Chongqing, a key centre of commerce in Southwest China. The B.C. delegation will depart Beijing and arrive in Seoul on Thursday, Nov. 28. The Korea program includes both the second annual Canada-Korea Natural Gas Forum and the fifth anniversary of British Columbia’s sister-province relations with Gyeonggi on Friday Nov. 29.

The Jobs and Trade Mission will arrive in Tokyo on Saturday Nov. 30, and the Japan program includes meeting with LNG investors and a B.C. natural resources lunch on Monday, Dec. 2. The Premier will return to Vancouver on Tuesday, Dec. 3.

The mission comes as major liquefied natural gas developers in Canada are facing renewed calls from Asian buyers for cheaper exports of the super-cooled fuel.

Kunio Nohata, a senior general manager of gas resources with Tokyo Gas Co. Ltd., Japan’s second-biggest LNG importer, said at a recent Calgary forum that the current gap between North American, European and Asian LNG prices “is very significant,”

The decades-old practice of linking LNG sales to the price of oil is “unreasonable” in a world flush with gas, he said.

Fuel procurement costs account for half of Japan’s trade deficit, which swelled to roughly US$9.8-billion in August.

Japan also recently teamed up with India to push for cheaper supplies, challenging some of Clark’s plans to underpin B.C.’s economic future to LNG.

Other Asia-Pacific importers “are suffering from a similar situation,” Nohata said, in a recently published interview adding “there’s almost a common consensus.”

The Norwegian-based International Gas Union (IGU)  warned last month that LNG project costs in Canada far exceed those in the United States because of the longer distances and lack of pipeline grid or other connections.

The high costs associated with transporting gas up to BC’s remote coast makes the benefits of fetching a higher price overseas “difficult to financially justify,” the IGU said in its study.

Former federal cabinet minister Jim Prentice has also acknowledged that project developers in Canada are struggling with potential customers in Asia over the cost of LNG, which requires technology to liquefy the gas, reported the CBC.

There are at least five LNG export projects proposed for the B.C. coast, including terminals in Kitimat and Prince Rupert. The B.C. government has said it wants to develop an LNG export industry and wants three terminals in place by 2020.

But each project involves an investment of billions of dollars, and Prentice says there is regulatory and structural uncertainty holding up the projects.

Jose B.T. Aldon, a senior advisor with Philippine power generator First Gen Corp., dismissed the idea that companies need oil-linked prices to support their capital LNG commitments as “a good sales talk.”

Aldon, a former director of international business development with TransCanada Corp, said the traditional LNG pricing mechanism “cannot be sustained.” LNG “has to be competitively priced” or it will lose market share to coal-fired generation, he said in an interview.

The Philippine economy is on a tear, hitting growth rates above 7% in recent quarters. By 2020, Aldon anticipates the country could require four million tonnes of LNG per year, or 400 million cubic feet a day, reported the Financial Times.

But Clark seems confident about her mission.

“B.C. has a competitive advantage on the international stage, and these trade missions are about making sure B.C. businesses and communities see the benefits. As we develop LNG and other priority sectors, deepening our relationships through trade missions and strategic outreach will lead to more economic activity here at home, and more jobs for British Columbians,” she said.

The Asian mission at a glance

China

China's population, growing economy and its strong personal, family and business ties to British Columbia make it a priority market.

China is B.C.'s second-largest trade partner. In 2012, B.C.'s exports to China reached $5.9 billion, an increase of 18 per cent from 2011 - and a 495 per cent increase since 2001.

From January to July 2013, B.C.'s exports to China increased 11.7 per cent compared to the same period last year.

British Columbia ranks first among Canadian provinces as a source of Canadian exports to China. In 2012, British Columbia's exports of goods accounted for 28 per cent of Canadian exports to China.

British Columbia has established four Trade and Investment Representative offices in China: Beijing, Shanghai, Guangzhou and Hong Kong.

Our international trade and investment network connects B.C. businesses with new markets and trade opportunities and promotes British Columbia as a stable and attractive destination for investment, tourists and international students.

Korea

Korea is British Columbia's fourth largest trading partner and third largest export market in Asia. B.C. exports were valued at $1.9 billion in 2012.

From January to July 2013, B.C. exports to Korea were valued at almost $1-billion, representing an increase of 117 per cent since 2001.

In 2012, B.C. goods represented 52 per cent of Canada's exports to Korea.

Korea is the world's second-largest importer of LNG. Its public natural gas company, KOGAS, has signed long-term agreements with LNG Canada in Kitimat, and is involved in shale gas development projects in northeast British Columbia.

Korea's national green-growth strategy has led to increased interest in B.C. biomass as a means of meeting the country's new renewable energy standards.

British Columbia's Trade and Investment Representative office in Seoul opened in May 2008.

Japan

Japan has the third-largest economy in the world. As the country continues to recover from the earthquake, tsunami and nuclear crisis of March 2011, Japan's growing demand for British Columbia's natural resources, energy supplies and building products will continue to solidify the trade and investment ties between the two jurisdictions.

Japan is a long-standing trading partner and source of investment for B.C., with shared interests ranging from lumber, pulp and paper to construction, mining and tourism.

Japan ranked No. 3 as a destination for B.C. exports in 2012 ($4.1 billion total); 13.1 per cent of British Columbia's commodity exports were shipped to Japan last year.

Over 40 per cent of Canada's exports to Japan originated from B.C. in 2012, with coal, metallic minerals and forest products as top exports.

Japan is a major partner in the development of B.C.'s natural gas and LNG industry. Mitsubishi is a project partner in LNG Canada, and during the Jobs and Trade mission in May 2012, Premier Clark signed an agreement with Japan's Oil, Gas and Metals National Corporation (JOGMEC) to collaborate and share information on natural gas development activities.

British Columbia has operated a Trade and Investment Representative office in Tokyo since July 2007.

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