CHARTS: The coming critical minerals trade war is BRICS short of a load
"While a large number of countries around the world continue to talk about securing raw material supply, China is actually doing something about it."
The B.C. government’s annual three-day LNG Conference opened May 21 in the shadow of an announcement that Russia had signed a $400 billion, 30-year deal to supply natural gas to China – one of B.C.’s hoped for long-term liquefied natural gas customers.
While Premier Christy Clark shrugged off the deal, saying there is plenty of opportunities to do business in China, the CEO of Petronas – now considered to be the frontrunner to build a liquefied natural gas plant in B.C. – warned against “unrealistic expectations” that could jeopardize B.C.’s plans to become a major LNG exporting nation.
Under a deal announced May 21, Russia will supply China with 38 billion tonnes of gas per year. By contrast, a single large LNG plant, like the one Petronas plans to build in Prince Rupert – at a total cost of $36 billion – would produce 18 mmtpa (million metric tonnes per annum).
In a scrum with reporters after her opening speech to hundreds of LNG industry leaders, Clark said international players investing in B.C. – including a number of Chinese energy companies – were well aware that China and Russia have been negotiating a new deal that would see gas piped from Siberia to China, and that that hasn’t stopped them from investing here.
“There’s still lots and lots of space for British Columbia in the Chinese market,” Clark said. “And we haven’t seen any interest diminish from our partners in China.”
She added that Canada has a reputation as a reliable, stable nation.
“We’ve certainly seen the way that Russia likes to do business these days, and we certainly know that the Chinese want a dependability of supply,” Clark said.
“Our reliability as a partner is an advantage. I don’t think there is a country in the world today that wants to depend on Russia as their sole supplier of natural gas.”
The 38 billion tonnes of gas that Russia would supply to China represents about one-third of China’s current gas demand. That demand is expected to grow dramatically, as China starts weaning itself off of coal, in an effort to get a handle on its air pollution problem.
China is not considered a near-term market for B.C. LNG, in any case – South Korea and Japan are. B.C. is in a race to try to get LNG plants up and running by 2020, which is when many 20-year contracts with major utilities in Korea and Japan are due for renewal.
Longer term, however, China is a large potential market, and B.C. is now competing Australia, which already has three operating LNG plants and seven more under construction, Qatar and the U.S.
Tan Sri Dato Shamsul Azhard Abbas, CEO of Petronas, said Australia’s LNG boom has “fizzled” somewhat, due to the high cost of doing business there, which has scared off investors. He warned against B.C. doing the same thing.
His company’s Pacific Northwest LNG project in Prince Rupert would will require a total investment of $36 billion, Abbas said. His company and its offtake customers will decide by the end of this year whether or not to go ahead with that investment.
Abbas warned that his company would not make that final investment decision if it doesn’t make economic sense. Although a long-term stable supply of LNG is important to Petronas’ customers, he said they would not buy it “at all costs.”
One of the outstanding issues for investors is the tax regime in B.C. Earlier this year, B.C. announced it would tax LNG income up to 7%. The government announced the tax would generate $100 billion over 30 years and wipe out the government’s debt.
In what appeared to be an indirect reference to the tax, Abbas warned: “Let’s not slaughter the goose before it even has a chance to hatch the golden egg. This is a once in a lifetime opportunity for B.C. We must be careful to not squander it away by making unrealistic expectations.”
By: Nelson Bennett
