BG Group Announces LNG Delay for Canadian Markets

Published at 10:46AM - 30/10/14

BG Group plc has announced that it will be delaying its timeline for a new LNG terminal planned for the Pacific coast. The new timescales are likely to be proposed for the next decade, according to the group’s Canadian business. The news is an indicator of the challenges that Canada is facing in building its Liquefied Natural Gas industry.

BG has been planning the export terminal for British Columbia as one of eighteen different terminals worth many billions of pounds of investment in total. They have been planned in order to ship LNG to markets around the globe, particularly within Asia. However, concerns around operational and build costs have led to a delay in the plants actually proceeding to their construction phase.

The company filed a project scope and description to Canada’s regulators in 2013 and said that it hoped to press on with construction in 2016 for the initial phase of the British Columbian LNG plant, worth $11 billion. It also aimed to begin commercial operation by 2020. However, this timeline is now under scrutiny and reassessment. The latest news was confirmed by Madeline Whitaker, BG Canada’s President, when speaking to the Wall Street Journal.

Ms Whitaker explained that the delay had occurred due to changing market factors, such as an influx of LNG which is expected to come out of the USA and flood international markets. BG has agreements in the USA to market gas produced from two separate LNG facilities.

She added that the group still saw a future for Canadian-derived LNG, particularly to supply the growth in demand in countries such as China. Although their view of anticipated demand in the longer term remained unchanged, their view on the right timing to put Canadian volume into the markets had adjusted.

The project would require a build entirely from scratch on a site which is also undeveloped in a remote part of BC’s northern coast. With the other American LNG projects that BG has a stake in, existing terminals are being repurposed — notably in Louisiana in an area that is already heavily industrialised.

This week, the group said that it would moderate its future development expenditure in Canada and take a ‘prudent’ stance. When releasing its Q3 earnings, BG announced an underlying profit drop of 29pc for this quarter, down to $759 million.

The deferment announcement comes shortly after the BC government cut a planned LNG tax by 50pc, in a bid to encourage the province’s ambitions of becoming a global centre for natural gas exports. However, Rich Coleman, British Columbia’s Natural Gas Development Minister, said that he ‘wasn’t surprised’ to hear the BG announcement and didn’t expect it to affect other businesses weighing up LNG investments in the area.

Other companies that are backing plans for LNG terminals in British Columbia include Royal Dutch Shell, Exxon Mobil Corp, Cnooc Ltd, the Chinese state-run business, and Petronas, which is owned by the Malaysian state.

Canada is keen to build its LNG export capability to provide an outlet for natural gas surpluses deriving from production booms in Canada and the USA.

Last updated on 11:02AM - 06/11/14