Alberta,
14
November
2016

Stepping on the Gas

Five Things to know about liquefied natural gas

Natural gas is a very handy hydrocarbon. It heats homes and warms dinners, it fires barbeques and power plants; it even fuels some vehicles and industrial operations. The problem is, given its nature—i.e. it’s a gas—it can’t be transported easily outside of a pipeline and is particularly tricky to ship overseas.

Cue liquefied natural gas, or LNG. By condensing it into liquid through cooling at LNG facilities, natural gas can be loaded onto specially designed vessels and shipped around the globe. Currently there are no such facilities on Canada’s west coast.

Recently though, the Canadian government granted conditional approval to a proposed project to construct an LNG facility and associated infrastructure to ship B.C. gas to overseas. However, the operator, Petronas, has stated it will review the project before deciding on next steps.

Here are five things that the AER’s Energy Forecasting Group think you should know about LNG, especially how it might relate to Alberta.

  1. Many proposed, few constructed. While many west coast LNG projects have been proposed—more than 20 at present—it’s considered unlikely that all will move forward at once.
  2. Size matters. Canadian LNG projects tend to be smaller than those proposed elsewhere, typically under 2 billion cubic feet per day or roughly 10 per cent of Alberta’s daily output.
  3. Not built in a day. Realistically, if any LNG development occurs in the short to medium term, it’ll likely be a single project. Should construction begin today, shipments probably wouldn’t begin until 2021.
  4. Opportunities for Alberta? Development of a single LNG facility would support further natural gas production within the Western Canadian Sedimentary Basin (WCSB), with production coming from BC and Alberta. Even if the LNG facility relies solely on B.C. gas, it’s expected this would result in less B.C. gas being shipped to Alberta, which in turn means less competition with Alberta production of natural gas.
  5. Possible Alberta price bump. The development of a large, west coast LNG facility would definitely be an encouraging signal for the investment community, as it will provide another outlet for WCSB production to reach new markets. And while one facility might not lead to significantly stronger prices, any good news for market access and diversification is good news for all involved—including Albertans.

It should also be noted that Alberta isn’t a complete stranger to LNG facilities, though on a much smaller scale than port-based facilities. Ferus Natural Gas Fuels Inc. operates an LNG facility southwest of Grande Prairie and has proposed a second in Sturgeon County; the AER has called for a hearing into this one. The LNG produced from such landlocked facilities are primarily used as an alternative to diesel.

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