UNBC professor takes more cautious approach to LNG prospects in 2015

Responding to comments by Rich Coleman, UNBC professor Paul Bowles suggests caution, not optimism, defines 2015 LNG.

A University of Northern B.C. economics professor says people should be cautious, rather than optimistic, about LNG in 2015.

UNBC’s Paul Bowles was responding to minister of natural gas development Rich Coleman’s year-opening statements saying 2015 will be the year.

Bowles, however, says Coleman essentially has to push for a final investment decision (FID) on a project for 2015 or things will get hard for the government’s predictions.

“He pretty much has to say it’s this year, or his targets for 2020 won’t be met,” he said.

Yet ‘cautious’ is the word Bowles would use when thinking of LNG prospects in 2015.

“He’s [Coleman] on one end of the optimism spectrum. The government brought in its tax regime which was designed to be very competitive to get companies to commit, but that hasn’t happened,” he said. “Global energy markets are in turmoil at the moment, which nobody predicted. It’s unclear what what’s going to happen to the price of oil which will affect competitive fuels like LNG.”

He added “It would a brave person to make a prediction about what will happen to the price of oil prices over the year and therefore the natural gas prices over the year, which will determine how much investment takes place…Rich Coleman must have a better crystal ball than most of the rest of us.”

It’s not an entirely pessimistic outlook for the industry though. He does agree partially with some of Coleman’s ideas, such as that drilling in the northeast, and pipeline agreements made over the past couple of years, can mean there’s confidence in the industry. But Bowles only sees those as small parts of the larger picture.

“That shows it’s still a possibility, but the difference between a possibility and a guarantee is quite a big gap,” he said.

And for pipeline agreements themselves, he said you only need one person not signing up to throw a wrench in everything else.

“You can’t build 60 per cent of a pipeline,” he said. “Any one legal challenge would have consequences.”

B.C., he also says, has challenges due to its geography causing any projects here to be high cost compared to other environments.

Coleman in his LNG outlook also repeated the government’s belief that the industry will lead to 100,000 jobs, but that’s another area Bowles says could be too optimistic.

“That’s very high,” he said. “They tend to count both what they call direct and indirect jobs on that.”

He adds,  “That’s still a very optimistic number. I’ve never seen a full justification for that number.”

In Coleman’s outlook, he said that the government is anticipating that companies will begin making their LNG decisions this year.

“After three years of planning, we anticipate British Columbia’s liquefied natural gas (LNG) industry will take flight in 2015 as leading proponents make final decisions to move forward,” said Coleman, in a written statement.

Kitimat-based projects were among his list of six projects which have received provincial environmental approval.

“We now have 18 proposals for LNG export operations. Provincial Environmental Assessment Certificates have been issued for six LNG projects – the Westcoast Connector Gas Transmission pipeline, the Pacific NorthWest LNG export facility in Port Edward, the Prince Rupert Gas Transmission pipeline, the Pacific Trail Pipeline, the Kitimat LNG project in Bish Cove, and Coastal GasLink Pipeline.”

“While the interest has been tremendous,” he continued, “our goal remains to meet the BC Jobs Plan target of three LNG facilities by 2020. This would increase natural gas production and provincial revenues.”