Canada

Canada boasts considerable gas resources – about 573 Tcf of technically recoverable shale gas resources – the fifth largest in the world according to the EIA. With production levels continuing to surpass domestic requirements, and the shale gas revolution changing the face of the US, Canada’s traditional export market, a large potential gas resource is now stranded in the west and east of the country. Companies with upstream positions in Canada are now seeking alternative export routes.

The combination of this surplus of gas with a long history of gas and oil exploitation, modern infrastructure, openness to foreign investment, and most importantly, an ideal geographic location to serve both Asian and European markets – has led to a large number or proposals for LNG export projects. At last count, there were more than 25 proposed projects with a total capacity of more than 350 mtpa, from a mixture of established LNG players and new, entrepreneurial developers. While these are mainly located on Canada’s West coast, these include four proposed projects on the East coast of Canada.

However, despite being under development since as early as 2006, no Canadian LNG export project has yet taken FID. On the West coast, challenges relating to the cost of construction, difficult sites and long, expensive pipelines to link to gas resources, negotiations with the indigenous First Nations peoples, and delays in environmental approvals initially slowed progress. More recently, the uncertainty created by low oil prices together with difficulties in securing firm offtake contracts in a weak market have caused further delays, and brought into question the viability of many of the proposed projects.

In Eastern Canada offshore gas production is declining in Nova Scotia, and due to public concern, there are moratoriums on fracking in place in Nova Scotia, New Brunswick and Newfoundland and Labrador. The four LNG export projects under development on the East coast have been hampered by questions over gas sources, as well as wider market and price uncertainty.

Key Issues

  • Canadian LNG projects could be amongst the highest cost LNG projects per mtpa ever to be developed. In a low oil price environment, securing firm offtake at a price which enables the project to be proceed is critical.
  • Complex, high-cost projects require investment, and projects will need to raise significant equity and debt:
    • Those seeking investment must successfully structure a project to attract that investment. This requires appropriate allocation of risk and reward to enable financing to proceed while also remaining cost competitive
    • Those investing must understand the nature and magnitude of risks, and how the project will manage those as the project develops. Regulatory uncertainty may hinder prospective investors.
  • The scale and pace of new LNG project development could create competition for people. Those with the right commercial experience and expertise are few and far between, and attracting and developing the right people will be a real competitive advantage
  • A complex regulatory environment and uncertainty over the fiscal regime and energy policy have caused delays. The impacts of the recent election of apparently pro-environmental governments both in Alberta and at the Federal level on LNG project development are also yet to be fully understood.
  • Project proponents have had mixed success in engaging and consulting with First Nations, which each claim unique and sometimes overlapping interests in the areas under development: early and well planned engagement is critical to ensure all stakeholders are aligned.

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Relevant Experience

Gas Monetisation Strategy

Strategic advice on the monetisation of Horn River gas as LNG for export, and development of a credible project proposition to support engagement with potential partners, government and customers.

Competitive positioning for west coast LNG export project

Gas Strategies was engaged by an under-development west coast North American LNG export project seeking to enhance its understanding of its relative competitive positioning.

Commercial due diligence and advisory support

Gas Strategies provided commercial due diligence and advisory support to Blackstone in its $2 billion equity financing of the Sabine Pass Liquefaction project.

Capability development and training

Gas Strategies provided training and capability development services for an IOC operating in Canada, which is moving into LNG exports.

Commercial advisor to liquefaction projects

Gas Strategies has a proven track record providing commercial advice and project development support to liquefaction projects around the world. We have supported a number of North American projects, both pre-FID and through commercial operational readiness support as they prepare for...

Development of LNG sales strategy

Gas Strategies supported a Client which was seeking to develop a new LNG project, to determine the attractiveness of the global LNG market, select from supply/demand gap analysis the most attractive markets to target and to develop a market engagement plan.

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