A liquified natural gas (LNG) tanker sitThe Western Canadian province of British Columbia (BC) is trying to get its liquefied natural gas (LNG) export plans together, they really are. However, problems are besetting the country’s once high-flying ambitions.

As the price of crude oil, both global Benchmark Brent and NYMEX-traded West Texas Intermediate (WTI) plunged by over half since mid-June, BC’s dream of its first LNG export project also plunged. In December, citing dropping oil prices and provincial tax and regulatory uncertainties, Malaysian oil major Petronas announced that it was postponing plans for the all-important final investment decision (FID) on its C36 billion (US$32 billion) BC-based Pacific Northwest LNG Project. A FID must be reached so funding can be secured along with long-term off-take supply agreements before construction can begin.

Since that time, BC upped the ante by offering more favorable tax incentives to LNG project proposals. Unfortunately for both BC and Petronas, the price of LNG hasn’t found a floor yet, and likely won’t anytime soon as more supply for the super-chilled fuel is due to come on-stream this year and next year — possibly making Petronas still reticent over making a final decision.

Last week, however, brought new hope. Rich Coleman, BC’s Natural Gas Development minister, said that he expects the Petronas-led project to forge ahead. However, he cautioned that any FID will be delayed by a lengthy federal environmental review. After a recent trip to Malaysia to meet Petronas’ recently appointed CEO Wan Zulkiflee Wan Ariffin, Coleman said that he “came out of Malaysia as optimistic, if not more optimistic, than I’ve ever been.”

The Toronto-based Globe and Mail said last week that the Petronas-led gas venture already has a provincial environmental certificate and now requires a federal certificate. On Feb. 23, the Canadian Environmental Assessment Agency (CEAA) halted the regulatory clock at Day 240 of the one-year review process, meaning a federal ruling on Pacific NorthWest LNG could extend into August or even September.

However, even if the Petronas-led project goes through it, in addition to other BC-based projects, they will be at a decided disadvantage compared to its nearest and perhaps toughest competitor, the US. Though BC projects have a shorter distance to LNG markets in Asia than many US projects, most have to build capex intensive pipelines, while the US already has sophisticated pipeline infrastructure in place. Second, the US is already ahead in the race. By year’s end, Cheniere Energy’s Sabine Pass LNG project on the Gulf of Mexico will export its first cargo.

Of the 19 BC-based LNG export project proposals, nine have been approved by Canada’s National Energy Board (NEB), but none have reached a FID. In the US, dozens of LNG export project proposals are waiting for Federal Energy Regulatory Commission (FERC) approval, while four more, in addition to the Sabine Pass project, are already under construction. According to the FERC website, they include: the Cameron  LNG project in Hackberry, LA;  the Freeport LNG project in Freeport, TX; Dominion’s LNG project in Cove Point, MD; and Cheniere’s Corpus Christi project in TX.

Another advantage US-based projects enjoy over their BC-counterparts is the fact that they are being built on brownfield sites, with existing power infrastructure and roads already in place. In Canada, much of this will have to be constructed. Two more factors must be included in this North American LNG race. In Canada, many project proposals must first secure approval and work out deals with aboriginal groups. This is not the case in the US. And finally, the cost of constructing these mega multi-billion dollar projects relies on skilled labor, something the US has an abundance of, while BC will have to bring in labor from overseas, thus increasing construction costs.

However, despite the increased competition, there may be enough LNG demand for both countries to find success. Asian demand accounts for about two-thirds of over all global LNG demand, and that figure will continue to expand. Likewise, ExxonMobil recently estimated that global LNG trade will more than triple through 2040, to nearly 100 billion cubic feet (bcf) a day – around 40 percent higher than current US gas output.