Future decreases in global gas demand, even under the most bullish scenarios, presents economic risks for LNG expansion in the province

VANCOUVER | UNCEDED xʷməθkʷəy̓əm (MUSQUEAM), Sḵwx̱wú7mesh (SQUAMISH) AND səlilwətaɬ (TSLEIL-WAUTUTH) TERRITORIES — Proposed expansion of the liquefied natural gas industry in British Columbia carries significant economic risks for private and public sector proponents, according to a new report by Carbon Tracker, an international financial think tank that specializes in the energy transition’s impact on capital markets.

Turning Tides: The economic risks of B.C.’s LNG expansion in a changing energy market, supported by the Pembina Institute and the David Suzuki Foundation, compares the economics of all currently proposed LNG projects globally that have yet to reach final investment decision. It concludes that the four LNG terminals still awaiting final investment decision in B.C. are likely to lose out to competition from producers in Qatar, the U.S. and Mozambique, which can supply significant volumes at lower prices.

Based on expected operational dates and current development timelines, B.C.’s industry will ramp up just as global LNG production is expected to plateau, making it a late entrant to a market dominated by established incumbents with better opportunities for economies of scale.

These assessments are based on underlying data that show the global LNG market is likely to be oversupplied by the end of this decade, as a glut of new production comes online. According to the International Energy Agency, there is enough existing global LNG infrastructure to meet the level of demand likely to be in place by 2040 — even in its slowest energy transition scenario.

Quotes

“This report is a reminder that, under a shifting global market for natural gas, these projects carry significant economic risk. That risk extends beyond the private companies who wish to build and operate LNG infrastructure to the government, if it subsidizes the construction, operation or the decarbonization of the LNG terminals and upstream production of gas. B.C. taxpayer dollars should be leveraged to attract low-carbon investment in clean growth industries as a priority over additional investments in plateauing fossil fuel markets.”

— Janetta McKenzie, Oil and Gas Program Manager, Pembina Institute

“With the extraordinary rise of inexpensive renewables, it’s clear that fossil fuels will play a smaller and smaller role in global energy systems. This report highlights the big economic risk facing those in B.C. backing further expansion of the liquefied natural gas industry. B.C. is late to the LNG race, it’s a high-cost producer and it would be wise to heed the evidence that the economic outlook for LNG is risky. With a glut of LNG and declining demand by the end of this decade, it’s better to focus on investing in clean energy with long economic growth dividends.”

— Thomas Green, Senior Climate Policy Adviser, David Suzuki Foundation

“Demand for gas is predicted to peak by 2030, and the global LNG market is facing a glut of new supply in the next few years. Our research shows LNG projects in B.C. will be outcompeted on price by other producers and, by the time they come online, will be late entrants to an already crowded LNG market. This report is a warning to investors, policy-makers and communities that returns from new projects are a risky bet.”

— Maeve O’Connor, Analyst, Oil, Gas and Mining, Carbon Tracker

Link to the report on the David Suzuki Foundation website: https://davidsuzuki.org/science-learning-centre-article/turning-tides-the-economic-risks-of-b-c-s-lng-expansion-in-a-changing-energy-market/

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Media contacts

Alex Burton
Communications Manager, Pembina Institute
825-994-2558

Theresa Beer
Communications and Policy Specialist, David Suzuki Foundation
778-874-3396

Daniel Cronin
US Communications Manager, Carbon Tracker
+1 617-678-5263

Background

Report: Squaring the Circle: Reconciling LNG expansion with B.C.’s climate goals