Taken from Bank of England report
Terry Ettam
Will LNG Canada boost and stabilize Canadian natural gas prices? Not so fast…
There was an article in last week's Bank of England report worth reading titled “Canadian Gas Companies Eager for LNG Boom, Oversupplied Swamp Market” which sums up the current situation quite well. Surprisingly, over the summer, the cheapest thing I could think of – candy, stamps, anything – was ten joules of gas, ten of which could take care of a modest house for a month. What a world.
However, there is a potential caveat in the article – LNG Canada's activities are expected to “reduce volatility in the AECO market.” Hmm…not so sure about that.
The premise is that new LNG exports will provide additional demand through entirely new natural gas exports. LNG Canada would certainly do that, but it would also introduce a wildcard into the equation.
Currently, existing systems are very stable on a day-to-day basis, and any major outages are usually planned and announced in advance. But that’s not the case with LNG terminals.
There are a number of events that could occur over a very short period of time that would cause LNG terminals to shut down, as these terminals do not have significant (or any) natural gas storage accompanying them (or LNG Canada doesn't anyway) that can act as a buffer even in the event of a power outage. , bad weather, equipment failure, accidents…the list is long, each of which may cause LNG to stop running quickly and have a major impact.
Such speculation is not without precedent. Two years ago, a U.S. LNG export facility ceased operations after a relatively small explosion, negatively impacting U.S. natural gas prices for eight months.
Consider, too, that the U.S. natural gas market is, in a sense, described by Nassim Taleb as “robust”; the country has a major natural gas pipeline system and natural gas can generally flow in both directions. Therefore, the US market (which is also huge) was able to absorb the 2 bcf/d that was pushed back into the market, with a noticeable but not devastating effect on prices.
In another sense, the U.S. natural gas system will acquire Taleb’s classification as “antifragile”—becoming stronger through stress—because it is constantly reinforced by such stressors, and the construction of new pipelines is As needed to enable new production and connect to new markets – to the extent regulations and enemies allow (currently that pretty much means “build only in Texas”, but that may change depending on which ass enters (changed by the White House).
Canada's natural gas market, on the other hand, is much more fragile, and even a relatively small whim, natural phenomenon or event can lead to dysfunction. Recall that a few years ago, an Enbridge gas pipeline exploded outside Prince George in northern British Columbia, one of two pipelines carrying natural gas into the Lower Mainland. Another line was shut down for two days for inspection, and some Vancouver schools turned off heat in buildings and lowered classroom temperatures due to reduced traffic.
If a natural gas system is extensive and reticulated, it can remain resilient, stable, and function well even if one part of it fails in some way. If a system is constrained and highly dependent on a limited number of access points (either for supply or sales), the risk of volatility increases significantly and the risk to consumers increases to unhealthy levels. Everyone should be thankful for the Vancouver students who have a cold, air-starved coastal October, rather than the Winnipeg students whose ears fall off in January.
On the other hand, LNG usage is soaring, and Canada may catch the wave, despite our
Dan Yergin, senior oilfield observer and author of legendary books AwardsRecently wrote an article for S&P Global called “The Return of Energy Security.” It's full of good information about how the world can recognize that the energy transition may be an admirable goal, but it will undoubtedly take a backseat to energy security. Most of the world is not as arrogant as we are, but much of the world does not have the skilled oil and gas workforce that we do in North America.
Yergin noted that “the need for reliable and affordable energy is most important in developing countries, where 80% of the world’s population lives…Achieving energy security is fundamental to escaping poverty in general and addressing insufficient access to energy. .
He didn't whistle for Dixie. Much of the world is scrambling to secure supplies of LNG. According to the above article, India announced a $67 billion investment plan earlier this year to expand India's natural gas infrastructure. Colombia has vast natural gas reserves and is looking to increase its LNG import capacity. Malaysia, one of the world's largest LNG exporters, is seeking Increase Liquefied natural gas is imported to meet rising consumption.
Other countries are racing to meet new demands. The U.S. has become the world's largest exporter of LNG in just a decade, including leveraging some infrastructure developments begun 25 years ago when the U.S. planned to import LNG to meet its needs (the U.S. shale oil boom was another matter, increasing to approximately 20% of global supply in 15 years). Even Saudi Arabia has announced plans to become a major LNG producer, signing a 20-year offtake agreement for new LNG terminals in the United States.
Overall, the Gas Exporting Countries Forum (Observing Gas? Final Government Work), which consists of 12 member countries and seven observer countries, expects global gas demand to increase from 4,015 billion cubic meters in 2022 to 5,360 bcm by 2050, It will increase by 34% and there will be no peak on site. Since LNG trade is based on multi-billion dollar terminals that often require multi-decade contracts to be financed, most of the demand/trade will be baked into the system over the next few decades, so even though the GECF is talking about this It's books, and they have good reason to believe them.
Canada is alone in the face of the global steamroller of natural gas development, our leadership has rejected Germany’s begging for LNG and told them to take climate change seriously and wait for Canada’s green hydrogen economy to develop (haha) and you’ll get the first ships (Or once we decide how to build such a castle in the air, whatever it reaches) (The German leaders then flew to Senegal, hoping to overturn the Canadian leader's special position and encourage Senegal to develop their reserves and ship to Europe; in the end the Germans simply fought with The United States signed a long-term LNG deal, and with some incredible skills found the “business case” that Canada lacked).
Not to mention the demands on data centers, which seem to be getting crazier by the day. The largest AI players are now racing to lock in existing or near-existing nuclear power (Amazon, Google, Microsoft) because it is the only zero-emission 24/7 baseload power available. Everyone else will be scrambling for the 24/7 baseload they can get, and, with the newly rediscovered importance of energy security, these companies will put AI development ahead of any concerns about the type of energy they procure . Natural gas is the best choice because of its availability, speed of development, and relatively clean combustion. Therefore, AI data centers will appear wherever natural gas is available – and the process will be shortened if data center developers can build a power source that is independent of the grid (which is to development plans what quicksand is to humans) several years.
Five years old, the future depicted in it is pretty much as expected (ok, I missed the nuclear renaissance, sue me). Pick up The End of Fossil Fuel Madness, where energy is actually fun. oneCan be found in Amazon Canada, Indigo.caor amazon.com.
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