Russia-China LNG deal threatens B.C. efforts: prof 0
Pipes are seen at Dominion's Cove Point liquefied natural gas (LNG) plant on Maryland's Chesapeake Bay in this picture taken February 5, 2014. (REUTERS FILE PHOTO/ TIM GARDNER)
"The market that B.C. can capture is much smaller than they have anticipated, or they will have to drop their prices dramatically." — Hadi Dowlatabadi
A natural gas deal between China and Russia shows B.C.’s ambitious plan to develop the industry is a major mistake, with the province likely only accessing a small portion of the market, says a University of B.C. professor.
Despite failing to sign a highly anticipated $400 billion supply agreement Tuesday, a deal could be reached “any moment,” a spokesman for Russian President Vladimir Putin told Reuters.
Analysts suggest the sticking point could be China pushing Russia for a lower price for natural gas, which would be transported via direct pipelines.
Hadi Dowlatabadi, professor of Applied Mathematics and Integrated Study of Global Change, said with Russia and Iran cozying up with China, B.C. may as well forget its plans to sell to the country.
“Both of them are providing gas and LNG at very low prices, more like $4 a unit,” Dowlatabadi said. “That’s about a quarter of B.C.’s target price. Russia has the largest reserves in the world in terms of natural gas and Iran has the second largest reserves of natural gas.”
He said the province should instead develop more value-added industries.
Asked about the potential China-Russia deal, the Ministry for Natural Gas Development did not comment on the talks directly and pointed to existing plans with LNG producers.
“The interest and demand for B.C.’s natural gas continues to grow, highlighted by 13 LNG proposals in the province, as well as an international conference this week in Vancouver,” said an emailed statement. “A recent trade mission was also highlighted by two agreements with LNG proponents — Petronas and Woodfibre LNG — and a commitment to advance investment decisions for each proposal.”
During Premier Christy Clark’s recent trip to Asia to promote the province’s LNG sector, she signed two letters of intent to further look at investment from two companies already involved in the province backed by Singaporean and Malaysian firms.
Dowlatabadi said the best the province can hope for is to capture a portion of the 10% of the available Chinese LNG market, as the country will likely keep some reserves from North America suppliers in case Russia or Iran destabilize politically.
— with files from Reuters