Despite 15% Anticipated Natgas Shortfall By End 2009, Canadian LNG Plans Still Mostly Vapor

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Domestic production of natural gas is falling as demand continues to shoot up, a situation that over the past few years has positioned liquefied natural gas as an energy saviour. Have no fear, the industry has argued, there are massive reserves of clean-burning natural gas around the world just begging to be tapped. If that gas can be cooled to the point where it becomes a liquid, is shipped across the ocean to North America and turned back into a gas, then worries about domestic shortages become a non-issue in the context of global supply.

LNG, according to a recent white paper from the Canadian Gas Association, "is becoming an increasingly effective part of the Canadian and Ontario natural gas supply bundle." Such overseas supply will meet 15 per cent of North American natural gas demand by 2020. The National Energy Board, at the same time it announced an anticipated 15 per cent decline in domestic natural gas production between 2007 and 2009, confidently asserted last October that over the long term, "Canadians should rest assured" that their natural gas needs will be met as unconventional sources, including LNG, enter the market.

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TransCanada only has two LNG projects on the books. So far, it has hit a brick wall on both. In fact, LNG imports are shrinking when they're supposed to be growing. Figures released Thursday by the U.S. Energy Information Administration revealed imports in the first quarter of 2008 were less than half the volume compared with a year ago. Over the year, the agency expects a 12-per-cent drop compared with 2007. "The decline in U.S. natural gas imports is the result of higher prices in Asia and Western Europe, which compete with the U.S. for LNG supplies," the agency said.

And there's little indication those higher prices are poised to fall. As with oil, metals and other commodities, demand for natural gas in China is growing. On Thursday, PetroChina purchased 25 years of LNG supply from Qatar in what analysts are speculating was a $60 billion (U.S.) deal. Japan and South Korea also remain big importers, willing to pay top price for energy security and closing the price gap with oil. UBS says it has "believed for some time that LNG prices would be squeezed upwards in the next decade by the Asia-Pacific LNG market moving toward oil price equivalent."

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http://www.thestar.com/Business/article/413800