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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Could The Tide Be Turning Against North American Natural Gas?

A lot of hope has been pinned on liquefied natural gas (LNG) exports as an outlet for surging North American gas supply.

But a couple of events the past week show that getting LNG exports off the ground may be more difficult than most observers have predicted.

The biggest potential setback came in western Canada, where it appears that the newly-elected Canadian federal government is making a move to limit offshore shipments of petroleum.

Local press reported that new Prime Minister Justin Trudeau has directed the country's Transport Ministry to impose a ban on crude oil tankers for the northern coast of British Columbia. With the directive now expected to be formalized with other government departments including fisheries, natural resources and environment. Related: Global Supplies Outweigh Paris Attacks For Oil Prices

That's a tough development for oil export projects like the planned Northern Gateway pipeline which was supposed to carry heavy oil to the British Columbia coast for export -- but now appears likely to fall by the wayside.

The anti-tanker directive also calls into question planned LNG developments on Canada's west coast.

A number of plans are on the books for LNG export terminals here, from firms like Shell and Petronas. But the ban on oil tankers raises the issue of whether LNG vessels might also come under scrutiny -- and potential restrictions -- from the government. Related: The Bakken’s Big Decline Is Already Underway

At the same time, another government has also rejected coastal LNG -- on the other side of the continent, in the state of New York.

New York's governor Andrew Cuomo said last Thursday that his government is rejecting a proposed LNG terminal off the coast of Long Island with the state saying that security risks and possible damage to fisheries and offshore wind developments make the project unacceptable. Related: Oil Market Supply Imbalance Getting Worse, Not Better

The New York facility was supposed to be an LNG import terminal -- aimed at increasing gas supply into the local market, which still suffers periodic shortages. But the rejection of the facility could have knock-on impacts for both LNG import and export developments elsewhere on the east coast.

All of which suggests that sentiment (as well as economics) may be turning against North American LNG; an important factor to consider as we assess the future for natural gas prices in this key market.

Here's to the shipping life,

Dave Forest

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  • Bill Mendenhall on November 18 2015 said:
    I found this article to be flawed in at least two respects. First, regarding the Canadian oil tanker ban, LNG tankers do not pose risks of the nature or magnitude of oil tankers. As most everyone knows, an LNG leak would have no oceanagraphic effects, since the gas would simply evaporate. While this would certainly have an enviornmental impact, by the release of greenhouse gases, this is unlikely to be a local consideration in deciding the site of an export facility.

    Second, regarding the Long Island import facility, the decision not to permit an import facility has exactly the opposite effect as the author asserts. Denying such a facility greatly helps the LNG export market and the North American gas industry as a whole.

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