LNG in BC September 30, 2016 – The British Columbia LNG Dream is Over for Now


On Tuesday the Canadian federal government approved the Pacific NorthWest LNG enterprise, a shock to most people who believed they had voted for a government that was a friend to the environment, first nations and to a clean energy future. The BC government is happy.  Albertans are ecstatic.  Business leaders are cheering.  Northern O & G workers are pleased.

Maybe they knew something we didn’t and they knew it was a moot point.

The NGI National Spot Gas Average fell 9 cents to $2.53, and after settling just inches away from $3.00 Tuesday, October futures succumbed to weakness as well, falling 4.4 cents to expire at $2.952. November shed 4.8 cents to $3.002.   Apparently no one in Victoria noticed.  Ottawa must have.petronas downstream

This morning it was reported that Petronas is considering selling its majority stake in a $27-billion Canadian liquefied natural gas (LNG) plant.  Well duh.  LNG prices for delivery into the main markets in northeast Asia have slumped more than  70 per cent since Petronas announced in 2012 that they would build in BC. Looking at recent numbers, there has been a 46 percent drop in benchmark Asian spot LNG since 2015 and an anticipated jump of 45 percent in supply by 2021.  Last month, Petronas reported an 85 per cent slide in second-quarter profit and labelled the industry outlook “gloomy” well into 2017.  Did no one in Victoria notice?

Not only that, but some of the conditions Ottawa placed on the project include putting a hard cap on carbon emissions that will likely mean the company will have to scale back the size of the operation. There is no way Petronas will build something half-ways, what multinational would unless it made economic sense.  Do you really think they care about the environment?

The BC Government has been betting on the cheap prices for LNG in North America versus those in Asia.  This has been their biggest mistake from the get go.   The International Energy Agency (IEA) said in June 2016 in its Medium-Term Gas Market Report 2016 that between January and May 2016, the average differential between Asian LNG spot prices and U.S. prices was just US$2.5/MBtu, well below the average spread of around US$11/MBtu that had prevailed between 2011 and 2014. Gas prices in Asia will continue to be influenced by oil prices, but a period of expected oversupply and increasingly flexible LNG markets is seen to gradually reduce that gas/oil price correlation.

Then you have several liquefied natural gas projects led by Russia’s Novatek and Gazprom taking on investment from Japanese banks.  It’s a matter of geography.  Russia is closer to Asia than BC.

Other LNG projects in British Columbia have also faced delays, underlining the market outlook. In July, Royal Dutch Shell and its partners pushed back a decision on building an LNG export terminal, and C

Premier Christ Clark BC LNG

hevron has delayed the scheduled 2017 start of its Kitimat LNG project.

The BC election is less than eight months away.  The provincial Liberal government’s 2013 jobs plan promised LNG would generate $1 trillion in economic activity and create a $100 billion prosperity fund.  There is $100 million in that fund. It came from general revenues. How are they going to spin this?


UPDATE:  The Ministry of Natural Gas Development says in an email it spoke with Petronas and was reassured about the Pacific NorthWest LNG project after a news report indicated the Malaysian state-owned oil firm was pondering selling its stake.  http://www.cbc.ca/news/business/petronas-lng-project-1.3785389

LNG in BC Update July 2016 – Predictable

Well, anyone who has read my blog know where I stand on LNG in British Columbia. Against it for so many reasons, but really upset that our provincial government has no clue when it comes to global economics. LNG Canada — a partnership of Royal Dutch Shell, Korea Gas, Mitsubishi and PetroChina — made an announcement Monday that they were postponing their decision to go ahead with a facility, throwing more doubt onto the B.C. government’s hopes to complete anything before next year’s provincial election.
Here is a summary of where we stand today:

LNG Price

Henry Hub natural gas spot prices reached a nine-month high in June, according to the Energy Information Administration (EIA), which bumped its forecast for 2016 prices up to $2.36/MMBtu, with 2017 prices expected to average $2.95/MMBtu.  In fact, LNG producers reported a banner month, as LNG exports rose by 500,000 tons to a total of 3.6 million tons during June 2016, an increase of 18.5 percent from May.

I would also predict a short term price rise as Cheniere Energy’s Sabine Pass liquefied natural gas (LNG) export plant on the U.S. Gulf Coast will shut down for planned maintenance in September

McKinsey Energy Insights (MEI), predicts in its latest research that LNG oversupply could last until 2024. As a result, this could mean that few LNG projects will reach final investment decision (FID) in the next 12 to 18 months including those in British Columbia.

MEI’s research shows that the current global LNG supply glut is exacerbated by the 100 mtpa of new export terminal capacity currently under construction in the U.S. and Australia. Furthermore, by 2019 oversupply will peak at 60 mtpa.

Their research shows that the current market oversupply is creating challenging conditions for operators hoping to take FID on projects in the near term,” said James Walker, a specialist at MEI. “For these projects to be viable they would require an assumption of either a sustained high LNG price post-2024 or a cost optimization strategy to reduce projected capital expenditures. Many projects will struggle to secure enough firm buyers in an oversupplied market. Even if projects do manage to progress to construction, the LNG supply will be hitting the market at a bad time.”

Here in BC we are seeing the effects with slumping natural gas prices on the global market meaning that the province budgeted for $128 million in royalties this year, far from the $493 million collected two years ago.

Changes in Policy Japan

Another challenge to future LNG growth comes from Japan, where regulators are examining contract restrictions and allowing LNG shipments to be re-sold, potentially under-cutting producers and putting downward pressure on prices. Such a move would disrupt existing contractual relations and potentially sever the link between LNG and crude prices. Existing restrictions on re-sale essentially force importers to consume whatever LNG they import; dropping these restrictions would allow importers to essentially become LNG merchants themselves, re-selling unwanted or unused LNG to other customer

Kitimat LNG Canada project indefinitely postponed.

LNG Canada CEO Andy Calitz said that a drop in natural gas prices around the world, particularly in Asia, has made the project too expensive for now.  The consortium LNG Canada, which is jointly owned by Shell, PetroChina, Mitsubishi and Koga, was set to make a final investment decision for the project last February.  That decision was later pushed back to the end of 2016.

I would predict that no decision is made until after the provincial election in 2017 with the company stating, “At this time, we cannot confirm when this decision will be made.

While Petronas could still make a decision this year, it faces some of the same market challenges that Shell faces, plus the added hurdles of First Nations hostility, an environmentally problematic site and a federal government that appears to be in no hurry to see the project proceed.

The two projects combined would represent a total capital investment of roughly $80 billion in British Columbia– the spending equivalent of about nine Site C dam projects.


Premier Christ Clark BC LNG

The provincial Liberal government’s 2013 jobs plan promised LNG would generate $1 trillion in economic activity and create a $100 billion prosperity fund. There is $100 million in that fund. It came from general revenues.


The Panama Canal now allows wider liquefied natural gas carriers to pass through, making it possible for U.S. shale gas to more easily make its way to Japan.

The canal used to be able to accommodate vessels 32 meters wide. Now it can handle ships with widths of up to 49 meters. This, together with newly launched U.S. LNG exports, had promised to alter global energy distribution networks.

U.S-based LNG exporter Cheniere Energy in February started shipping LNG from a terminal in the U.S. state of Louisiana, along the Gulf of Mexico.  And Sempra Energy’s Cameron LNG facility, near the Gulf Coast of Louisiana, recently received authorisation from the US Department of Energy (DOE).  The authorisation will allow the company to export an additional 1.41 billion ft³ of natural gas per day (bcfd) from the proposed liquefaction expansion project to countries that do not have a free-trade agreement with the US. Following the order, the facility’s export capacity will be 24.92 million tonnes per year.

The USD$10 billion facility, which is under construction, is expected to commence operations during 2018 with the first full year of operations set to begin in 2019.

Many others are to follow. The U.S. Department of Energy estimates that some 550 LNG carriers will go through the Panama Canal per year. Most of them are bound for Japan and elsewhere in Asia.

Citibank paints another picture though with their analysts reporting on 13 July that U.S. LNG is too expensive to compete in the Pacific, even with the newly-upgraded Panama Canal allowing for larger shipments. The canal expansion, completed on 26 June, was expected to be a game-changer, as before only 6 percent of the world’s LNG fleet could pass through the locks, whereas now only the largest class of ship is incapable of passing through.


While Hawaii is a tiny market, it is interesting to note that In mid-May, Hawaiian Electric said a proposed contract to deliver 800,000 mt/year of LNG to Hawaiian Electric from FortisBC’s Tilbury LNG facility in British Columbia, starting in 2021, was contingent on the Hawaii Public Utilities Commission approving the merger.  All of these things chip away at BC’s LNG Dream.


British Columbia’s biggest future customer according to many, Japan imported 88 million tons of LNG in 2014. According to a projection that the Japanese government made last year, the country’s LNG demand is expected to decline to about 65 million tons by fiscal 2030.  Korea’s imports are down, and while Chinese demand is growing, a full 69% of their needs come from their own gas fields.  This percentage is expected to rise as China looks for more self-dependence.

The provincial Liberal government’s 2013 jobs plan promised LNG would generate $1 trillion in economic activity and create a $100 billion prosperity fund.

There is $100 million in that fund.  It came from general revenues.













BC’s LNG Plans – Is Shell’s decision this week the beginning of the end?

No one wants to see our economy flounder in BC, but without divestment it will crawl to a halt. The plan for BC to invest so much of its future on LNG has been probably the most unwise decision made by a government in years. So much riding on one component of the economy as the world turns away from fossil fuels including Saudi Arabia who is divesting from oil and introducing new taxes on products such as tobacco and sugary drinks as examples of attempts to wean its economy off oil.

I could subscribe to the environmental reasoning here, but the fact is that there is no need.  Economics trump any other argument that people can come up with.  Here are some snippets from The International Energy Agency, The Wall Street Journal, CNN, The Financial Post and others detailing how much the LNG future is in peril.


• The International Energy Agency cut its forecast for an increase in global gas demand and said that rising supplies of liquified natural gas (LNG) will lead to lower prices and a shift in trading patterns in the next five years. The Paris-based watchdog sees global demand rising by 1.5% a year through 2021 compared with a 2% increase projected last year, it said in its latest Medium-Term Gas Market Report.

• Demand will wane for all fossil fuels as the world economy requires less energy given improvements in technology. As demand growth for coal and oil also weakens, the share of gas among fuels will increase “modestly” by 2021, the IEA said

• The spot price of natural gas has dropped 54% in the past two years, according to the US Energy Information Administration, amid slack demand and increasing inventories.

• By 2021, Australia will rival Qatar as the world’s largest LNG exporter. “We see massive quantities of LNG exports coming on line while, despite lower gas prices, demand continues to soften in traditional markets,” said IEA Executive Director Fatih Birol. “These contradictory trends will both impact trade and keep spot gas prices under pressure.”

• Eighteen LNG projects have been proposed in British Columbia, but none has secured a final investment decision.

• Royal Dutch Shell Plc., which is leading a consortium to develop an LNG project in British Columbia, has also delayed an FID till at least the end of the year.

• The lack of appetite to build new multi-billion natural gas export projects is driven by depressed natural gas prices. In Asia, LNG prices are currently trading at US$5 million British thermal units, a far cry from the US$15-18 per mBtu enjoyed earlier in the decade.

• Customers are also re-negotiating long-term supply contracts as new supply set to come onstream gives them more bargaining power. Globally, 16 projects with a capacity of just over 150 billion cubic metres per year are under construction— more than a third of the existing 415 bcm capacity.

The American market has been kicking our ass. Our infrastructure was designed to ship oil and gas to the USA, and in a post-shale (fracking) world, the Americans are importing less and less with exports of Canadian natural gas to the U.S. dropping off to about seven bcf/d, from a high of 10 bcf/d in 2007.
U.S. LNG proponents, already enjoying the advantage of having infrastructure previously built for LNG imports, kept moving forward. In February, Cheniere Energy Inc., using its Sabine Pass facility in Louisiana, was the first U.S. company to ship LNG. The first LNG shipment from Canada is not expected until after 2020. Culbert says Pacific North West LNG’s project has lost customers to U.S. projects.

Shell Investment in BC
Royal Dutch Shell said Tuesday (June 7, 2016) that it’s shifting away from growing its liquefied natural gas business, as it moderates growth and prioritizes cash flow generation and returns on existing projects.
Shell said while its integrated gas business was previously a “growth priority,” it has now reached a critical mass after completing the acquisition of gas giant BG Group in February. The proposed Prince Rupert LNG project in B.C. that BG put on hold in 2014 does not appear on a list of projects with pending investment decisions in Shell’s presentation released Tuesday

Global prices

Global natural gas prices will remain under pressure in the medium-term as demand remains tepid across the world leaving suppliers to scramble for new markets, according to the International Energy Agency.  “Weak demand, low prices and a sharp cut back in investment weigh on growth,” the Paris-based energy watchdog said in its latest five-year natural gas forecast, published Wednesday June 8, 2016.


Chinese demand for Fossil Fuels

Chinese demand for Fossil Fuels

The IEA expects natural gas demand to grow at 1.5 per cent annually till 2021, compared to the robust 2.2 per cent annual growth seen in the past five years.

According to the IEA, Major traders and sellers of liquefied natural gas will begin to look to new markets over the next five years as demand from traditional centers wanes, the International Energy Agency said in a report.  In parallel, global supply is set to grow exponentially, putting pressure on prices in the spot market. Cheaper prices for alternative fuels, such as coal, will also soften gas prices, while more carbon-efficient technologies could push demand away from natural gas and toward renewables.  The market will likely find strength in China, India and Southeast Asia as Japan and South Korea buy fewer volumes, the IEA said.

Chinese gas demand slowed to around 4% in 2015, leading to fewer purchases on the spot market. But demand is likely to recover, as the country diversifies its energy sources away from dirtier fuels, such as coal, to work toward improving air quality. However, Chinese demand remains the largest downside risk to overall gas demand growth, the IEA said.






Global natural gas demand growth slows despite low gas prices: IEA

Slowing Global Demand Gains to Keep Natural Gas Prices ‘Under Pressure,’ IEA Says (NYSE:XOM)


Posted June 8, 2016

Patrick Smyth

The Realization of Hempcrete – Monty Chong-Walden

By Monty Chong-Walden

This is not the story of how hempcrete came to be; it definitely was not created in Vancouver. It has been around for hundreds of years, if not thousands. The Hemp plant has been cultivated around the world for centuries (the government of Canada says 10,000 years), as well as lime mortar being used by the Romans for their architecture and by the Chinese in building the Great Wall.

The more recent story of hempcrete starts in the mid-1980’s in France, which was one of only a few countries that did not prevent the cultivation of hemp during the ban on the cannabis plant. Apparently, Charles Rassetti came up with the idea of using the woody inner core of the hemp plant (called “shiv” or “hurd” and previously thought of as waste) and mixing it with a lime binder to create a bio-aggregate for repairing the medieval oak-framed house he was renovating. Hempcrete spread from there through Europe in the 1990’s, with many countries now having a thriving hempcrete building industry. France, Spain, Italy, UK, the Netherlands, Belgium, Ireland, and others now have hemp building product manufacturers, which include pre-mixed hempcrete binders, hempcrete bricks, hempboard, hemp batt insulation, plus more.

My personal realization of hempcrete walls came while doing Internet research on sustainable building products. I think many people, who are familiar with building and have a sense of how we are polluting our living environments and planet with oil-based building products, will have the same astonished reaction to hempcrete, when first coming across it, as I had. It blew my mind that this product was not in widespread use, in this day and age of climate change and atmospheric carbon accumulation! As a simple and natural product, it ticks all the boxes of performance, safety and cost. I kept on thinking there must be something wrong with it – there must be a reason why it is not more widely used if it is such a phenomenal product!?!? But, I could find nothing that indicated any major faults of hempcrete as a product, except development.

Besides the fact that hemp cultivation was banned in Canada until 1998, it seems that there has been very little commercial interest in developing the product. Maybe this is because the traditional method of mixing hempcrete on site and pouring into forms seems too antiquated and messy for most people to consider. They want clean, manufactured, and wrapped-in-plastic building materials to arrive on site for their house or building. It may have something to do with the large established corporations that supply building materials having no interest in something new and not wanting to lose any market share. To some degree it seems that the market crash in 2008, as well as the last, very un-progressive government of Canada were holding things back here. There was one chart I saw for industrial hemp production in Canada, which showed good growth through 2006, then a slump for a number of years before finally recovering to former numbers in 2011.

It didn’t take long to realize that there is very little being done in Canada and the US in regards to hempcrete. There was some minor activity I could find, but for the size of the overall building industry, it was peanuts. The time seemed ripe to realize a much bigger hempcrete industry for North America and change how we build.
I decided, pretty well right there and then, I was going to jump in and make a difference with hempcrete!

Visit Monty at his website at http://www.hempcretewalls.com/

LNG in BC – Updated outlook for April 2016

It’s a beautiful Monday morning in Whistler and I am looking at the markets.  I just read that the Saudi’s walked away from the Doha talks has analysts predicting $30 oil (price per barrel) within days. Thankfully the markets are not reacting, as it appears most hedge fund managers have already built in $20 oil into their financial models. The hick-up in January shook out a lot of the old pricing, and now the market is ambivalent. Of course, if you are a government like Venezuela, you are completely screwed.

This got me asking, what is happening with LNG pricing this month as the BC Government waits nervously for decisions to be made in Ottawa. Well, I spent a decade in the gaming industry, and I wouldn’t bet on LNG providing the BC economy with the billions of dollars promised, nor the tens of thousands of jobs. Here are a few reasons:

Cheap Oil: Well, if you are a company looking to change from oil to LNG, why? Oil is cheap. Low oil prices are denting the take-up of liquefied natural gas as a cleaner source of energy to power ships, and it will be a few more years yet before the fuel makes serious inroads into the marine bunker market. As an example, Norwegian LNG producer and industrial supplier Skangas told Reuters that ship-owners have delayed planned conversions to LNG from diesel for up to two years due to the fall in oil prices.

Not good for the environment by the way.

First Nations: Apparently, First Nations are not united in their love for LNG as we have been led to believe. First Nations leaders from British Columbia are scheduled to travel to Ottawa this week to make their case against a proposed liquefied natural gas project near Prince Rupert. Hereditary Chiefs of Lelu Island, Wetsuwe’ten and Gitxsan First Nations join other leaders to protest what they say are misleading claims of indigenous support for the Petronas-led Pacific Northwest liquefied natural gas project. A recent letter from Lax Kw’alaams Mayor John Helin to federal Environment Minister Catherine McKenna offered backing for the $36-billion LNG project on Lelu Island, south of Prince Rupert, if two conditions are met. In a new release, Hereditary Chief Donald Wesley,a Lax Kw’alaams delegation member, says the incorrect claim of aboriginal support led to a letter from the Port Authority of Prince Rupert, threatening the eviction of protesters from traditional Lelu Island territories.

Glut: There is continued waning demand in Japan and South Korea, the biggest LNG users, where spot prices collapsed almost 80 percent over the past two years. For BC to meet it’s projections, LNG demand must grow by over seven percent per year CAGR (compound annual growth rate). If the LNG market grows at the same rate as the global economy is expected to do, i.e. at not more than a 2 percent CAGR, demand and supply will not balance by 2020 or even by 2025. (Source: http://oilprice.com/Energy/Gas-Prices/Where-Is-The-LNG-Glut-Going.html)

And capacity worries? Global LNG production will expand by 146 million metric tons a year through 2020, about half the capacity of existing plants, according to Danish utility Dong Energy A/S. Why would anyone invest and build more?

Summary: LNG prices averaged about US$6.8 per million British thermal units in Japan in March, far lower than the US$16-US$18 per MBtu a few years ago, when most of the 18 LNG projects on the B.C. coast were proposed. In addition, a number of new LNG projects have come on stream over the past few years, raising doubts over demand for new LNG projects over the next decade. By the way, did you know that Petronas just slashed spending on infrastructure by cutting spending in the next three years from $3 billion to $500 million Montney basin that straddles the Alberta-B.C. border?

I can’t wait to see how this will be spun in the election next year.

Patrick Smyth

Whistler BC: Ask Province and Feds for more money before taxpayers

Taxes up. Funding down. Spending up.

Corporations expand and shrink based on a mix of outlooks including global financial prospects, currency valuation and sales forecasts.

The RMOW does not derive income directly from product sales and needs to look at the economy closer than it is now.

Between January 2015 and 2016, Canadian food prices rose four per cent, according to Statistics Canada’s consumer price index. But fresh fruit and vegetables showed some of the biggest increases, shooting up 12.9 and 18.2 per cent, respectively.

Let’s put this simply. The cost of groceries is going up and I am spending more to feed my family than I did a year ago.

The decision makers at the RMOW must know that taxpayers have less disposable income, yet property taxes have increased.

The most recent five-year RMOW budget forecast calls for continues growth in expenditures, and yet without a product to sell, it must rely on continued increases in taxes and line items like DCC’s (Development Cost Charnges). Given a cap on housing, the downturn of the economy with associated disposable income in the RMOW, the municipality must not rely on continued permits/DCC’s to fund itself.

So the RMOW is looking at taxpayers again to meet shortfalls and spend on capital projects.

While the budget proposals seem to be in line with the needs of the RMOW, I am opposed to any tax increases in the short term.

I also note looking at line items in the budget expenditures and duplication of jobs there may be some fat to be trimmed. This duplication comes, from my perspective, in that Tourism Whistler and the Chamber do a lot of the same jobs as the RMOW; both are inter alia funded in part by RMOW.

Reducing staff in private corporations is normal in times of economic downturns. I hate to see anyone lose their job, and therefore do not advocate layoffs. A hiring freeze must be implemented now so this doesn’t happen.

It also concerns me that the Province of B.C. has cut funding to the RMOW (RMI funding went down this year from $7.1 million in 2015 to an expected $6.73 million). This is in part because of a downturn in the economy and that there will be a failure in the long-term budgeting of the province that is based on LNG royalties. Ergo the projected revenues for the province will not be met and we will see a “significant cut back in the public sector” as someone commented on the Whistler Politico Facebook page.

Last month the B.C. Government announced that 21 new Early Years Centres were on the way to various municipalities. When looking at some of the towns that are getting these centres, one has to wonder if they give back to the provincial coffer as much as the RMOW does?

And then when you look at the Garibaldi at Squamish development getting the green light recently on its environmental review, it would seem that RMOW concerns are being ignored provincially.

I hear time and time again that tourism is up, record hotel nights, and so forth, yet Victoria is reducing our funding. There is something fundamentally wrong here. Who is lobbying on our behalf in Victoria? No one. And in Ottawa? No one.

Our CAO has an exceptional background, but my belief is that unless you have dedicated lobbying in the provincial and federal capitals, then we are but a voice in the wilderness. Instead of spending $120,000 to study traffic on a provincial highway, the RMOW should be spending those funds on lobbying for additional funding. Spend money to make money.

Additionally, the new government in Ottawa is about to spend billions in infrastructure, and the RMOW should be looking to get some of the funds allocated to capital projects. Are we on top of that?

If the RMOW wants to spend more money, then they need to squeeze it out of the Victoria and Ottawa, not my pocket.

Patrick Smyth

First published in the Pique news magazine, Whistler BC

No LNG, few jobs, little hope.

By Betsy Trumpener, CBC News Posted: Mar 11, 2016 5:28 PM PT

With no LNG projects confirmed, British Columbia’s once booming gas fields are now one of the worst places in the province to find work.

And while analysts have been closely watching Alberta’s oil patch slump, few have noticed the collapse of B.C.’s gas patch — except those who are suffering the most.

Don Loewen, a long-time contractor for the natural gas industry in northeastern B.C., has had to cut 48 people from his crew of 60 workers.

His experience is all too common.

‘These guys will quit drilling entirely’

“If these LNG plants don’t go — at least one of them — these guys will quit drilling entirely,” said Loewen. “As it is, it’s almost ground to a halt.

“All our employees are off looking elsewhere, but there really is nothing else. There is no work,” said Loewen, whose company builds roads to gas leases.

It’s very difficult to sleep at night.– Art Jarvis, Energy Services BC

Tamara Kemble’s husband recently lost his electrician’s job in Fort St. John.

Her family is now living on her husband’s employment insurance benefits, while shelling out $1,000 a month for medical expenses that used to be covered by his benefits plan.

‘Tough not to be able to support your family’

“It’s a huge hit to the ego,” said Kemble. “It is tough not to be able to support your family. I just hope he can get a job.”

Local official say things will become even more desperate when EI runs out for many in the summer.

Already, some unemployed workers have fallen on such tough times, they’re turning to the Salvation Army in Fort St. John for Greyhound bus tickets home.

Captain Sheldon Feener hears from more and more men who travelled far from home to work in northeastern B.C.’s gas patch to support their families.  Now, they’ve lost their jobs, their temporary apartments and even their pick-up trucks.

‘There’s just nothing left’

“They’ll come in and some of them are still dressed in their work gear,” said Feener. “They’re like, ‘There’s just nothing left, I’ve got no way to get home. I can’t afford to spend the money on the bus ticket.'”

“These are very proud people who’ve worked very hard to provide for their families and are now stuck,” said Feener, who’s put workers on the Greyhound bus back home to B.C.’s Lower Mainland and Alberta.

“It’s about as bad as it gets. Doom and gloom,” said Art Jarvis, executive director of Energy Services BC, which speaks for 200 gas service companies.

Jarvis owns a contracting company, too. But he’s had to lay off 80 per cent of his workers, and the cuts are still coming.

“We’re going through another round of layoffs. It hurts. It’s very difficult to sleep at night when you know that there’s families depending on you.”

Jarvis doesn’t expect anything will improve in 2016. And it could get worse. He says only a definitive announcement from Shell or Petronas/Progress Energy that an LNG project is moving ahead will restore confidence and jobs.

BC staked future on LNG

Christy Clarke’s B.C. Liberal government has staked the province’s financial future on LNG and promised it would generate 100,000 jobs.

But the jobless figure for northeastern B.C’s gas producing region hit 8.5 per cent in January.

In February, the number of people without jobs in that region rose to 9.2 per cent — despite the fact these months are traditionally the busiest and most profitable in B.C.’s gas patch.

“Right now most of our eggs are in this basket,” admitted Loewen, the gas field contractor. “This seems to be a global thing. We just feel we have absolutely no control over what’s going to happen.”

Seems like more and more people thinking the day of fossil fuels is coming to an end

In a recent conference, the CEO of Canadian Pacific Railway says fossil fuels are “probably dead.”

Hunter Harrison told a transportation conference today that the transition to alternative fuels will be long, but new investments in traditional energy sources will dry up because of environmental hurdles.  The country’s second-largest railway has seen shipments of crude drop due to declining demand brought on by the dramatic fall in oil prices.

Thermal coal shipments have also waned.

Harrison said the rail industry will have to adjust to a shift to alternative energy sources, just as it did in the 1990s when the U.S. Clean Air Act wiped away 29 per cent of the business at Illinois Central Railway that he ran at the time.

He spoke at the J.P. Morgan transportation conference in New York.

Christy Clark Versus Antonio Villaraigosa

I used to fly SouthWest airlines a lot from Los Angeles to Las Vegas on business, and one time a very nice gentleman and his bodyguard sat next to me.

Recognizing Mayor Villaraigosa right away, the first thing I said was, “Good Morning Mr. Mayor. I am really digging what you are doing. Once question. Your the Mayor of one of the biggest cities on the planet, and you fly SouthWest?”

He said he was only going to Vegas and that it was for a lunch meeting, and that no elected official should waste all that money on a flight that is about an hour. Anyways, we had a great conversation about Canadians in LA and their contributions to industry. AntonioVillaraigosaHWOFMay2013

Meanwhile, B.C. Premier Christy Clark’s office is defending her travel expenses after documents obtained by freelance journalist Bob Mackin show she spent more than half a million dollars on private planes over the past five years.

Many of the flights were between Clark’s riding in Kelowna, in the B.C. Interior, and her home in Vancouver.   According to the CBC, WestJet and Air Canada frequently fly between those locations.

Mayor Villaraigosa was Mayor from 2005 to 2013 and couldn’t run again due to term limits. I have a feeling with shenanigans like this that Ms. Clark won’t be re-elected.

Strange bedfellows, LNG and Wind turbines in China

From the Pique Magazine - GO GREEN Green Party Leader Elizabeth May led a discussion in Whistler June 21 on the COP 21 conference on climate change last December in Paris. From left to right back row — AWARE's Claire Ruddy, Pemberton mayor Mike Richman, Squamish mayor Patricia Heintzman and Whistler mayor Nancy Wilhelm-Morden. Front row — MLA Jordan Sturdy and Green Party leader Elizabeth May.

From the Pique Magazine

Last week I couldn’t help but being astounded by seeing our MLA, Jordan Sturdy beside Elizabeth May in a phot op.  On one side of the pendulum we have a left-leaning environmentalist who believes that the economy should take a back seat to protecting the earth, and on the other, a member of the provincial party ready to do anything for the economy over the environment.  I speak specifically to the great LNG gamble that British Columbia is taking.    Let’s look at some of the environmental issues with LNG:

  1. To get at the gas you have to frack with chemicals that I can tell you from first-hand experience, are deadly.  Plus, apparently they cause earthquakes, but I am not completely sold on that one.
  2. To make LNG, you require incredible amounts of power to compress and chill it.  This power will come from drowning a vast area of land behind site C, and criss-crossing the province with more transmission towers.  And as the water sits still in the reservoir, plant material that was present before flooding begins to decay and release methane into the atmosphere.  Overall, hydro power is a great renewable source of energy, but we are building more capacity at what cost?
  3. The emissions from making and chilling LNG are astronomical.  And most emissions coming from the production of natural gas from shale are not taxed (55 per cent for processing and venting) and therefore will not be subject to the tax to reduce emissions.

There are also concerns about tanker traffic, pipelines and so forth.  But let’s stick to the facts.  Anyone who knows my stripe, knows that I look at the dollars and sense first.  So, let’s examine the economics.

I believe the Saudi’s disbanded OPEC and let the price of oil free-fall because they have come to realize that the day of a petroleum-fueled planet will end soon.  Technological changes will mean, much sooner than later, that oil isn’t as valuable as it once was.  So, the Saudi’s want to get as much money as they can now out of the ground lest their stuck with billions of barrels of useless muck.  It’s like hitting the bid when you know a stock is doomed and you need to get what you can.  Sell sell sell.

Given that the price of oil has tanked, and that the price of LNG has dropped like a lead balloon, what does the future look like?  Let’s look at some more facts:

  1. The B.C. government based its numbers on rising Asian gas prices, which were $15/MMBtu several years ago and are now to roughly $6 to $7/MMBtu.  Credit Suisse’s David Hewitt says that spot prices could drop to $5/MMBtu over the next few months, and even dip to an “eye-watering low” of $4/MMBtu at some point in 2016.
  2. The LNG spot market is growing and undermining long-term contracts.  Singapore is launching an LNG futures market, which could bring even more liquidity to the market instead of contracts between producers and buyers.   (Pretty good if you have natural gas heating your house by the way)
  3. LNG projects can’t be profitable without prices being around $11 because of the high cost of extracting and fracking shales.  Frack.
  4. We have the Asian flu.  The Chinese, Koreans and Japanese are importing less LNG than they once were.

Pundits will say that LNG will rebound.  They have to be reading different sources than I.  Pretty sure that the IMF, World Bank and Economist Intelligence Unit are pretty good sources though.    But here’s the kicker.

So many other countries (Australia, USA, Russia, China, Etc.) are also building huge LNG infrastructures that there will be a glut no matter how you look at it.    Demand is expected to jump by 50 mtpa by 2020. However, new supplies will add 120 mtpa in LNG export capacity over the same timeframe.  So more supply than demand.  Anyone who has passed grade four knows the laws of pricing when it comes to supply and demand.

Today (February 4, 2016), it was announced that Royal Dutch Shell is “postponing” a final decision on the $50-billion LNG Canada project in Kitimat.    BC Premier Clark had campaigned in 2013 on a promise of a “debt-free B.C.,” with a $100-billion LNG prosperity fund from an industry expected to generate 100,000 jobs. The Government now estimates zero revenue from any LNG facilities until 2018-19, well after the Provincial election.

A model at the LNG Canada offices in Kitimat - Vancouver Sun

A model at the LNG Canada offices in Kitimat – Vancouver Sun

Elizabeth May might have a point worth listening to.  According to the Pique, “May pointed to the vast amount of solar and wind power now under development in China.”  Notwithstanding that the technology was stolen, renewables are finally growing and becoming cheaper thereby potentially replacing natural gas in the future.

According to a recent report this has already been proven.  “Some regions such as Germany and California, where renewable penetration has been high, gas demand growth has already been stunted by the penetration of renewables in the generation mix (causing a reduction in gas demand growth for power generation).”

LNG forecasting by BC bureaucrats has not taken renewables into consideration, and they suggested a doubling of the consumption of LNG in Asia over the next 20 years.    This same forecasting calls for billions of dollars into provincial coffers, and thousands of high-paying jobs.

They might want to rethink that and look to renewables like wind, solar and tidal energy which will be the real job-makers of the 21st Century.

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