The robust global growth prospects for natural gas have been set back by the Russian war on Ukraine. But higher prices and infrastructure destruction are only a pause in the inevitable journey of natural gas as it challenges coal and oil as the primary global source of energy. Opportunity continues to knock on Canada’s door. Sadly, it is mostly closed ..It all began with Japan, decades ago. To provide energy to fast-growing but energy-scarce Japan, the world has slowly developed the transportation and distribution system to make natural gas a global commodity. This is a deliberate and capital intensive process beginning with exploration and production, then transportation by pipeline to tidewater, followed by liquefaction (by way of cooling and compression), finally LNG loaded onto gigantic tankers for transport. At the destination, coastal facilities re-gasify and transport gas again by pipeline into storage for distribution..No surprise the Middle East, endowed as it is with incredible hydrocarbon deposits — and led by Qatar — has been an early LNG supplier. Australia has more recently developed its huge offshore deposits, and is now also one of the world's largest exporters of LNG..Russia, a large producer (distributing natural gas mostly by pipeline, not LNG) with the largest reserves, became a major source for Europe, especially Germany. We are all familiar with the sad story of miscalculations, first by Germany’s trust in Russia as a reliable provider of this critical source of energy, and secondly by Russia, assuming the trade relationship would survive its attack on the Ukraine, as it did the annexation of Crimea..Billions of dollars of critical infrastructure have been destroyed interrupting the growth story of natural gas, at least for the mid-term. Germany and Western European countries have been scrambling with the result that storage into the winter heating season is now surprisingly high. Highly sensitive to weather, it remains to be seen whether current inventories are satisfactory..Global gas consumption in 2021, roughly 4 billion cubic meters, declined slightly in 2022 given Russian supply cutbacks. Growth prospects for the next several years have also diminished; the International Energy Agency (IEA) predicts slower growth until 2025.. LNG tan ker exploded view .Turning to the North American market, thanks to vast deposits of low-quality natural gas resources, a skilled industry, and horizontal multi-frac technology (HMF), the US now produces 25% of the world's natural gas. Having exceeded 100 billion cubic feet per day (bcfpd) for the first time in 2022, and with the current IEA forecast being for an average production of 99.7 bcfpd for 2023, the US is in fact the world's energy superpower and is the the largest producer of both oil and natural gas. For the time, it is also the largest refiner of oil..However, the President and his Democrat supporters in Congress are dissuading continued growth of the industry, putting at risk important competitive and strategic advantages. Already the refining sector has been shrinking as long term investment requires the confidence of a sustained positive political environment..An important exception however, to the above, is the continuing strong growth of American LNG. It was only a couple of decades ago that re-gasification facilities were being built on US coastlines as domestic production was declining. Today, US LNG exports exceed 12 bcfpd with future projects increasing to 14-15 bcfpd by 2025..RBN Energy, a prominent research and advisory firm, provides an informative daily blog. It recently indicated that export growth of ANOTHER almost 15 bcfpd has a “medium-to-high” chance of progressing in the next three years.”.Is the “business case” really so much more favourable in the US versus Canada? (Just asking.).The US, however, also has naysayers who impede growth and potential export of natural gas..The largest producing basin, the Marcellus, referred to by RBN as Appalachia, produces more gas than all of Canada. With potential for significant growth, its location in the northeast has bumped into Trudeau-like ideologues, constraining capacity and even connections to new housing and industrial activity in the northeast. The growth of renewable energy has suitability for electrical generation but limitations for dependability. As we have seen recently in one of the leading countries, Germany, reliability requires a fossil fuel alternative. Natural gas is the obvious and superior twin for renewables, again demonstrated in Germany with its, until recently, high utilization of gas from Russia..The sad irony and reality for climate change zealots is that, with renewable output uncertain, the shutdown of nuclear power plants, and the loss of Russian natural gas, Germany is now utilizing more coal and emitting more greenhouse gases than at any time in its history..The US also exports about 6 bcfpd to Mexico by pipeline now roughly the current level of natural gas imported from Canada. An LNG project is planned for the west coast of Mexico, also to be US-supplied. In fact, the publication, BOE Report, indicates Mexico currently has 12 LNG export projects in early stages, five under construction..In Canada, over more than a decade, the natural gas sector has declined from 19 to 16 bcfpd. (Consumption growth in Canada, has been offset by reduced exports to the US.) There are, however, real signs of revitalization of this important resource..The trouble-laden LNG Canada project continues behind schedule and above budget, now expecting start-up in 2025. If Trains 3 and 4 are also constructed, and if two smaller projects on the West Coast are included, Canada's LNG export capacity will exceed 4 bcfpd. This enables a significant percentage production increase of almost 25% of recent levels of 17 bcfpd.. CGLCoastal GasLink .A sensible government would recognize the incredible economic opportunity in front of Canadians. Canada has a resource base to produce for at least 200 years at current rates..Pipelines from the Prairies to the Pacific might be the best economic opportunity ever presented to the aboriginal bands whose land the pipelines cross: All 20 bands have signed on with LNG Canada..The West Coast enjoys a significant competitive advantage, reducing the time and cost of transporting North American natural gas to the growth economies of Asia..The ideologues in Ottawa allow their zealotry to overcome simple mathematics and common sense. Given that most LNG replaces current or future coal plants, and that Canada produces the lowest emission natural gas in the world, LNG could have a material impact on global GHG emissions. But the focus of Ottawa is on Canadian reductions by restricting the energy sector, thereby missing the opportunity to contribute to a more significant global solution and attract important and significant investment. Think global, act local..; emission reductions in China have the same value as those in Canada or elsewhere..Unprecedented crisis-driven natural gas prices of 2022 are falling. Goldman Sachs is forecasting a US average NYMEX price of $5 per MMBtu, Bank of America $4.50, and the futures market about $6.60 as at year-end. Current storage is close to normal in the US and below the five year average in Canada, drained further by the December cold snap. Lower inventories here narrow the basis (differential for oil) but is always subject to the vagaries of short term weather..As the immense producing area of North America continues its journey from a disconnected island to an integral LNG player in the global market, price discovery will be increasingly determined by global supply and demand. This could bode well for North American natural gas prices, further defining the opportunity obvious to the US and Mexico but unacceptable to the zealots in Ottawa..Including the upstream investment to supply the export gas, the LNG Canada project investment exceeds $40 billion, and is the largest project ever in Canada. With dismal economic prospects described in earlier commentaries, one would think our federal government would aggressively advance more similar projects to benefit the environment, our economy, aboriginals, and national unity.
The robust global growth prospects for natural gas have been set back by the Russian war on Ukraine. But higher prices and infrastructure destruction are only a pause in the inevitable journey of natural gas as it challenges coal and oil as the primary global source of energy. Opportunity continues to knock on Canada’s door. Sadly, it is mostly closed ..It all began with Japan, decades ago. To provide energy to fast-growing but energy-scarce Japan, the world has slowly developed the transportation and distribution system to make natural gas a global commodity. This is a deliberate and capital intensive process beginning with exploration and production, then transportation by pipeline to tidewater, followed by liquefaction (by way of cooling and compression), finally LNG loaded onto gigantic tankers for transport. At the destination, coastal facilities re-gasify and transport gas again by pipeline into storage for distribution..No surprise the Middle East, endowed as it is with incredible hydrocarbon deposits — and led by Qatar — has been an early LNG supplier. Australia has more recently developed its huge offshore deposits, and is now also one of the world's largest exporters of LNG..Russia, a large producer (distributing natural gas mostly by pipeline, not LNG) with the largest reserves, became a major source for Europe, especially Germany. We are all familiar with the sad story of miscalculations, first by Germany’s trust in Russia as a reliable provider of this critical source of energy, and secondly by Russia, assuming the trade relationship would survive its attack on the Ukraine, as it did the annexation of Crimea..Billions of dollars of critical infrastructure have been destroyed interrupting the growth story of natural gas, at least for the mid-term. Germany and Western European countries have been scrambling with the result that storage into the winter heating season is now surprisingly high. Highly sensitive to weather, it remains to be seen whether current inventories are satisfactory..Global gas consumption in 2021, roughly 4 billion cubic meters, declined slightly in 2022 given Russian supply cutbacks. Growth prospects for the next several years have also diminished; the International Energy Agency (IEA) predicts slower growth until 2025.. LNG tan ker exploded view .Turning to the North American market, thanks to vast deposits of low-quality natural gas resources, a skilled industry, and horizontal multi-frac technology (HMF), the US now produces 25% of the world's natural gas. Having exceeded 100 billion cubic feet per day (bcfpd) for the first time in 2022, and with the current IEA forecast being for an average production of 99.7 bcfpd for 2023, the US is in fact the world's energy superpower and is the the largest producer of both oil and natural gas. For the time, it is also the largest refiner of oil..However, the President and his Democrat supporters in Congress are dissuading continued growth of the industry, putting at risk important competitive and strategic advantages. Already the refining sector has been shrinking as long term investment requires the confidence of a sustained positive political environment..An important exception however, to the above, is the continuing strong growth of American LNG. It was only a couple of decades ago that re-gasification facilities were being built on US coastlines as domestic production was declining. Today, US LNG exports exceed 12 bcfpd with future projects increasing to 14-15 bcfpd by 2025..RBN Energy, a prominent research and advisory firm, provides an informative daily blog. It recently indicated that export growth of ANOTHER almost 15 bcfpd has a “medium-to-high” chance of progressing in the next three years.”.Is the “business case” really so much more favourable in the US versus Canada? (Just asking.).The US, however, also has naysayers who impede growth and potential export of natural gas..The largest producing basin, the Marcellus, referred to by RBN as Appalachia, produces more gas than all of Canada. With potential for significant growth, its location in the northeast has bumped into Trudeau-like ideologues, constraining capacity and even connections to new housing and industrial activity in the northeast. The growth of renewable energy has suitability for electrical generation but limitations for dependability. As we have seen recently in one of the leading countries, Germany, reliability requires a fossil fuel alternative. Natural gas is the obvious and superior twin for renewables, again demonstrated in Germany with its, until recently, high utilization of gas from Russia..The sad irony and reality for climate change zealots is that, with renewable output uncertain, the shutdown of nuclear power plants, and the loss of Russian natural gas, Germany is now utilizing more coal and emitting more greenhouse gases than at any time in its history..The US also exports about 6 bcfpd to Mexico by pipeline now roughly the current level of natural gas imported from Canada. An LNG project is planned for the west coast of Mexico, also to be US-supplied. In fact, the publication, BOE Report, indicates Mexico currently has 12 LNG export projects in early stages, five under construction..In Canada, over more than a decade, the natural gas sector has declined from 19 to 16 bcfpd. (Consumption growth in Canada, has been offset by reduced exports to the US.) There are, however, real signs of revitalization of this important resource..The trouble-laden LNG Canada project continues behind schedule and above budget, now expecting start-up in 2025. If Trains 3 and 4 are also constructed, and if two smaller projects on the West Coast are included, Canada's LNG export capacity will exceed 4 bcfpd. This enables a significant percentage production increase of almost 25% of recent levels of 17 bcfpd.. CGLCoastal GasLink .A sensible government would recognize the incredible economic opportunity in front of Canadians. Canada has a resource base to produce for at least 200 years at current rates..Pipelines from the Prairies to the Pacific might be the best economic opportunity ever presented to the aboriginal bands whose land the pipelines cross: All 20 bands have signed on with LNG Canada..The West Coast enjoys a significant competitive advantage, reducing the time and cost of transporting North American natural gas to the growth economies of Asia..The ideologues in Ottawa allow their zealotry to overcome simple mathematics and common sense. Given that most LNG replaces current or future coal plants, and that Canada produces the lowest emission natural gas in the world, LNG could have a material impact on global GHG emissions. But the focus of Ottawa is on Canadian reductions by restricting the energy sector, thereby missing the opportunity to contribute to a more significant global solution and attract important and significant investment. Think global, act local..; emission reductions in China have the same value as those in Canada or elsewhere..Unprecedented crisis-driven natural gas prices of 2022 are falling. Goldman Sachs is forecasting a US average NYMEX price of $5 per MMBtu, Bank of America $4.50, and the futures market about $6.60 as at year-end. Current storage is close to normal in the US and below the five year average in Canada, drained further by the December cold snap. Lower inventories here narrow the basis (differential for oil) but is always subject to the vagaries of short term weather..As the immense producing area of North America continues its journey from a disconnected island to an integral LNG player in the global market, price discovery will be increasingly determined by global supply and demand. This could bode well for North American natural gas prices, further defining the opportunity obvious to the US and Mexico but unacceptable to the zealots in Ottawa..Including the upstream investment to supply the export gas, the LNG Canada project investment exceeds $40 billion, and is the largest project ever in Canada. With dismal economic prospects described in earlier commentaries, one would think our federal government would aggressively advance more similar projects to benefit the environment, our economy, aboriginals, and national unity.