As the energy transition accelerates, the oil and gas industry must contend with a shrinking market for its products. In response, certain companies are shifting the focus of their portfolios gas, and liquefied natural gas (LNG) in particular. The industry’s recent push into LNG has seen a surge in buildouts of new LNG infrastructure, and the global production capacity is expected to increase by c.50% by 2030.
In the face of this massive industry push into LNG, it is imperative for investors and policymakers to assess both the assumptions underlying the putative investment case and the risks involved should they be miscalculated.
The report, Turning Tides: The economic risks of B.C.’s LNG expansion in a changing energy market, examines the dynamics of the LNG market, highlighting uncertain (and, in some markets, falling) future demand and the likely oversupply of LNG by the end of this decade.
In the face of these challenging market conditions, it is imperative that companies and investors consider whether new LNG projects – which are massive, capital intensive, long-term infrastructure – will be value generative in the long-term, as the energy transition erodes demand for gas in many markets. Crucial to this equation will be the relative cost competitiveness of each new project.
To inform decision-making by investors, policymakers and other stakeholders on new LNG sanctioning, this report:
- Models all unsanctioned LNG projects globally to determine those which are at risk under the IEA’s NZE, APS and STEPs scenarios.
- Presents a cost curve of unsanctioned global LNG projects provide a view on the relative cost competitiveness of projects in different jurisdictions.
We then use the nascent liquefied natural gas industry in British Columbia as a case study. Focussing on five unsanctioned LNG projects in the province, we spotlight:
- B.C.’s relatively uncompetitive place on the global LNG cost curve
- The key drivers which render projects in B.C. less cost competitive
