Monday, February 24, 2020

Horgan's LNG Fantasy

We hear a lot about Asian markets eager to buy Canadian LNG.

That's a lie.

To extract, transmit, liquefy and ship Canadian methane to Asia requires a price of about $9 per million BTU to see any profit.


LNG prices in Asia recently fell below $4/MMBtu, down 40 percent from a year earlier. Prices in NW Europe (TTF) are down by nearly 50 percent, and Europe has record-high inventories for this time of year.

Mild weather in Asia, Europe and the U.S. have led to seasonally weak demand, with China in particular proving to be a disappointment to exporters. But a wave of new terminals coming online in the last year has also led to a huge increase in supply, dragging down prices. 
That means that major markets will exit the winter season with plenty of inventory, which will likely prevent a price rebound. TTF prices (LNG in NW Europe) for summer delivery are trading at around $3.50/MMBtu. Some analysts think LNG prices could fall below $3 by the summer.
In other words, if mild temperatures persist, and the glut grows worse, U.S. LNG exporters not under contract may be priced out. The caveat is that some of the LNG trade occurs under rigid contracts.

But even as some companies have shipments secured under contract, Goldman said that U.S. exporters would likely be the most affected by another decline in prices. “[W]e do not expect other LNG producers to balance the market by curtailing supply. This is consistent with our estimate that US liquefaction facilities face the highest variable cost among LNG exporters given that US gas needs to be bought from the grid as opposed to just getting lifted from the ground,” the bank said.
There's a reason Chevron is failing about trying to find a buyer for its Kitimat LNG plant project. There's a reason Chevron already had to write down the value of that project a full $2 billion. Nobody wants the stuff at anything near the price we need to turn a buck on it.

Then, as I discovered by checking the Barents Observer, the Chinese already have platforms on the Arctic Ocean drilling for methane. They have already discovered two massive gas fields off the Russian coast and they have a partnership deal with Russia's Gazprom to get that energy.

What in hell are we doing?


John's aghast said...

$9/million BTUs. That doesn't even include royalties! That's right. We have so much we just give it away.

Trailblazer said...

As with Alberta , fossil fuels are a bust.
The only Government income to be derived from them are in income taxes and not royalties.
We are the point where sales taxes are been forfeited to further this ,lost, cause.
At the end of the day we continue to mortgage the future of the masses who willingly cling on to the neoliberal dreams.


the salamander said...

.. John Horgan and his Party really deserve to be put under the public magnifying glass. Whether a useful % of MainMedia in BC and the rest of Canada can accomplish the complexity of handling a magnifying glass is actually a huge leap of faith.. seemingly its more convenient to simply look the other way.. or just not look. Personally, I contend British Columbia to be an astonishing glowing jewel of Confederation, politely letting adjoining Alberta preen in its shared mountain border and very different reality. For Canada to lose either to seperatism would be catastrophic.. identical in magnitude to losing Quebec. I'm not sure when Sea to Shining Sea became only a vague aspirational quaint notion to Jason Kenney & useful only for wedge politics.. but he waves that flag flag daily now.. the quid pro parasitic political quo. Its simply astonishing to observe in an elected Public Servant paid by Canadian taxpayers for how long now ?

But Horgan reminds of Trudeau.. They seem on parallel Petroleum Paths identical to Kenney's though are on teetering Political Paths.. both with shaky Minority Governments and both seemingly or obviously are Captured Governments glued in position by what must be Captured Political Parties who in no shale or form are Public Servants. Political Parties as Public Service ? Laughable propaganda

The behaviour pattern seems obvious as they're both, like Kenney, unwilling to wean themselves off sucking from the same teats to gain and maintain power and private money plus future benefits (Directorships). Talk about quid pro quo.. both these guys are pro ! Both, like Stephen Harper, say one thing while dreaming of the jackpot payoff for delivering the Holy Grail of 'CERTAINTY' to Big Business in regard to Aboriginal Title.. especially Big Energy, but also Big Forestry, Big Water, Big Electricity, Big Real Estate, Big Media and Big Private Money.

In the Big Leagues of teeter totters & seesaws in the political fluckery playgrounds.. the heavyweight champs are obvious. Also obvious is the dirtbag political scumbaggery of stuffing the various judicial levels whenever opportunity (majority government) knocks. As Stephen Harper proved, its a short game and a long game.. The short game analogy is stuffing one's pant pockets with lead (Donor Dollars). The long game is shifting the fulcrum via sold out complicit partisan Big Media. Convince the audience, the contest is on the level & fair play rules.. snort !

Canadians are seeing in very simple terms.. the process of the Petroleum Bully Boys versus Aboriginal Law & the Wet'suwet'en Peoples. The different markets and prices essentially are the rules, floating rules, favoring or handicapping what is not a game or sport at all, unless we want to accept its playground bullies playing fast and loose around rules, ethics and laws etc. Anyone failing to notice the RCMP in this particular episode would have to be visually impaired or just reads The Calgary Sun. Hint - RCMP are not defending The Law Of The Land.. especially The Land Of The Wet'suwet'en Peoples.. no its The Law Of The Economy, stupid ! That 'must be growing evermore' & take us unto to The Rapture Economy.

rumleyfips said...

Could you please point me to the Barents Observer piece? Nothing useful showed up with a couple of Google searches .

Gas already flows from Russia to China through the Power of Siberia pipeline and you point to the availability of much more methane .

If China owns fields, platforms and pipelines in partnership, there is not going to be much market for BC LNG there.

John's aghast said...

Maybe we could store it in underground bunkers until some future generation came up with a way to utilize safely. And economically!

The Disaffected Lib said...

Rumley, here's a link to the Barents Observer piece.

These developments have also been widely covered in both Norwegian and Russian media.

The Disaffected Lib said...

Yes, John, odd that you should mention it but that gas is already stored in these beautiful 'underground bunkers.' Well put, John.

The Disaffected Lib said...

Sal, I've tried to like the BC NDP but I've given up. When an election rolls around they turn green as hell and tell Green voters to back them, "we've got this." Then, once the ballots are counted, all bets are off. They're like Lucy to Charlie Brown in the timeless football sketch.

Owen Gray said...

Lots of people have forgotten what they were taught in Economics 101.

Purple library guy said...

I don't really disagree about Horgan's green credentials. But the peculiar thing is, Horgan has a minority government. He's propped up by Green MPs who could pull their support at any time. I haven't seen anything in the news about them saying a goddamn thing about LNG lately. They friggin' rolled over, so how are they any better? And on social justice issues, they're worse--or at least, the leader of the BC Greens in specific sure is.

The Disaffected Lib said...

Really, PLG, what great social justice triumphs do you credit to Horgan? Nice of you to deflect the issue to the Greens. What is their explanation? Why don't you know it?

Don't confuse Horgan's hype with reality. He's one of those guys who over-promises and under-delivers - every time.

The Disaffected Lib said...

Owen, I think we're finding our comfort zone in cognitive dissonance.