Liquified Natural Gas, (LNG) is a huge opportunity for B.C. and everyone wants to make sure we make the most of the opportunity. Although there are many different proposals from various proponents, the common theme is matching the large untapped supplies of natural gas in north eastern BC, with the hungry and growing markets in Asia. While this makes perfect sense, we should not rule out other additional opportunities. One such possibility which is particularly interesting at the moment involves sending the LNG east to Europe via Churchill, Manitoba.
Natural gas sells in Asia for multiples higher than it does in North America. This simple fact is what is driving all of the current interest in LNG. However, there are a number of obstacles that will need to be overcome in order to make LNG potential become reality. From an engineering perspective, the natural gas must first cross two mountain ranges on its way to the west coast. The gas must then be liquified using huge amounts of electric power; where that power will come from is yet to be determined. Also, along the route are many communities, including first nations communities, who will need to come together and work out the "social license" in order for these mega-projects to proceed. Finally, long term commercial agreements will need to be worked out with Asian buyers who have so far proven difficult to come to terms with. That's the view looking west. How about if we look east?
The physical route from The Peace river region to Churchill Manitoba is much less challenging; very flat with not a single mountain range to cross. Furthermore, the communities that a potential pipeline would cross are already much more accustomed to oil and gas development and so they would likely be much more accepting of a pipeline. Once the gas is at Churchill it's more or less clear sailing because due to polar ice melting, the sea route from Churchill to Europe is now an established and safe shipping route.
Would Europe be willing to buy our gas? I believe they certainly would and for a couple of reasons. As I mentioned in a column a few weeks ago, Europe is reliant on natural gas to power its economy. And as the recent crisis in Ukraine has illustrated, they are anxious to diversify their gas supply away from the volatile situation in Russia. Canada is about as secure a supplier as Europe could ever find. In fact, we already have an example close to home illustrating this point. European utilities already buy wood pellets from northern BC in order to generate electricity. They pay a premium for Canadian pellets because they know they can count on the supply. They would likely attach a similar premium to our gas should they have the opportunity to buy it.
From British Columbia's perspective, the obvious market for our LNG is Asia. However exporting some of our gas to Europe might not only be a way for us to increase our LNG potential, but it is a great way to diversify as well.
