LNG Canada to boost and stabilize Canadian natural gas prices? Not so fast…
There was a worthwhile read here last week in the BOE Report entitled “Canadian natural gas firms eager for LNG boom swamp market with excess supply”, which sums up the current situation quite well. It is astonishing that over the summer, the lowest-priced thing I can think of – candy, a stamp, anything – was a gigajoule of natural gas, and ten of those can look after a modest home for a month. What a world.
There was one potential caveat in the article, however – speculation that LNG Canada’s activity is expected to “reduce volatility in the AECO market.” Hmm…not so sure about that.
The premise is that new LNG exports will provide added demand via a brand new outlet for natural gas. LNG Canada will certainly do that, but it will also introduce a wildcard into the equation.
Presently, the existing system is remarkably stable on a day to day basis, with any significant outages generally planned and announced well in advance. But LNG terminals are not like that.
There are many events that can occur in very short order that can shut down an LNG terminal, because these terminals do not have significant (or any) gas storage accompanying them (or LNG Canada doesn’t anyway) that can act as a buffer in the even of a power outage, bad weather, an equipment failure, an accident…the list is lengthy, and each can bring the LNG off take to a standstill, quickly, with significant impacts.
Such speculation is not without precedent. Two years ago, a single US LNG export facility went out of service after a relatively minor explosion, and it had a negative impact on US natural gas prices for 8 months.
Consider also that the US natural gas market is what Nassim Taleb would call “robust” in one sense; the country is laced with major NG pipeline systems, and gas can often flow bidirectionally. Thus, the US market – which is also huge – was able to absorb the 2 bcf/d that was pushed back into the market, with a discernible but not devastating price impact.
The US natural gas system in another sense would earn Taleb’s classification of “antifragile” – that which grows stronger through stresses – because it is continuously strengthened by such stressors, new pipe is built as required to enable new production and connect to new markets – to the extent that regulations and enemies will allow (which, for now, pretty much means “only build in Texas” but that could change depending on which butt lands in the White House).
Canada’s natural gas market, on the other hand, is considerably more fragile in the sense of becoming dysfunctional at even a relatively minor whim or nature or incident. Recall a few years ago when an Enbridge gas line blew up outside of Prince George in northern BC – one of two that brings gas to the lower mainland. The other line was shut down for two days for inspections, and as a result of the reduced flow some schools in Vancouver turned off heat in buildings and reduced temperatures in classrooms.
If a natural gas system is extensive and web-like, it can maintain resilience, stability, and function well even if one part of it suffers a failure of some kind. If a system is constrained and highly dependent on a limited number of access points, both for supply and offtake, the risk of volatility increases significantly, and the risk to consumers grows to unhealthy levels. Everyone should be thankful those chilly gas-deprived Vancouver students in a coastal October were not Winnipeg students in ears-fall-off January.29dk2902lhttps://boereport.com/29dk2902l.html
On the other hand, LNG usage is soaring and Canada might catch the wave yet despite our habits
Dan Yergin, the senior oil patch observer and author of the legendary book The Prize, recently wrote an article for S&P Global called “The return of energy security”. It’s chock full of good information about how the world is recognizing that an energy transition may be an admirable goal but that there is no doubt it is going to take a back seat to energy security. Much of the world is not as cavalier as we are, but then much of the world does not have the, ahem, phenomenally skilled oil and gas workforce that we do here in North America.
Yergin notes, “The biggest emphasis on the need for reliable and affordable energy is in the developing world, where 80% of the world’s population lives… Attaining energy security is basic to making progress out of poverty in general and remedying the lack of access to commercial energy and electricity… Natural gas is a particular focus for promoting economic development — and for reducing emissions.”
He’s not whistling Dixie. Much of the world is stampeding to secure LNG supplies. Per the above article, India earlier this year announced a $67 billion investment plan to expand India’s natural gas infrastructure. Colombia, which has vast natural gas reserves of its own, is looking to increase its LNG import capacity. Malaysia, one of the world’s top exporters of LNG, is looking to increase imports of LNG to meet soaring consumption.
Other countries are racing to meet the new demand. The US has, in one measly decade, become the world’s largest LNG exporter, including by using some basic infrastructure developments started 25 years ago when the US was planning to import LNG to meet its needs (the US shale boom was something else, adding about 20 percent to world supplies in 15 years). Even Saudi Arabia announced plans to become a major LNG player, signing a 20 year offtake agreement from a new US LNG terminal.
Overall, the Gas Exporting Countries Forum, a group of guess-what’s comprised of 12 member countries and 7 observer countries (observing gas? The ultimate government job), expects global natural gas demand to increase from 4,015 billion cubic meters in 2022 to 5,360 bcm by 2050, a 34 percent increase, and with no peak in site. Because the LNG trade is anchored by multi-billion dollar terminals, which often require multi-decade contracts in order to obtain financing, much of this demand/trade is being baked into the system for decades to come, so even if the GECF is talking it’s book, they have very good reason to be believed.
In front of this global steamroller of natural gas development, Canada stands alone, with our leadership turning away an LNG-begging Germany with admonishments to get serious about climate change and just sit back and wait for Canada’s green hydrogen economy to develop (haha) and you’ll get the first boatload (or whatever it arrives in once we determine how in the heck to build such a castle in the sky) (German leaders then flew to Senegal, looking to trump Canada’s leadership’s peculiar stance, encouraging the Senegalese to develop their reserves and ship to Europe; ultimately the Germans simply signed a long term LNG deal with the US, who by some unbelievable skillset found the ‘business case’ that Canada found lacking).
And don’t even get me started on data center demand, which is getting more crazy by the hour it seems. The biggest AI players have now all raced to lock up existing or nearly-existing nuclear power (Amazon, Google, Microsoft) because it is the only emissions-free 24/7 baseload power available. Everyone else will be scrambling for whatever 24/7 baseload they can get, and, as with the newly rediscovered importance of energy security, these firms will place AI development over any qualms about what sort of energy they are sourcing. Natural gas is the best choice because of its availability, speed of development, and relatively clean burning. So look to AI data centers to pop up wherever there are natural gas supplies – it will shave years off the process if the data center developers can build a power source independent of the electrical grid (which is to development plans what quicksand is to humans).
Five years old, and the future painted within is turning out pretty much exactly as expected (ok, I missed the nuclear renaissance, sue me). Pick up The End of Fossil Fuel Insanity, where energy is actually entertaining. Available at Amazon.ca, Indigo.ca, or Amazon.com.
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Story Tip – and fuel for the abiotic oil controversy:
Natural hydrogen being sustainably produced deep under the middle of North America:
https://news.unl.edu/article/husker-scientists-exploring-hydrogen-energy-potential-from-underground-rift
Quote from above:
“The U.S. Geological Survey estimates there might be enough accessible natural hydrogen under the Earth’s surface to meet global energy needs for thousands of years.”
https://interestingengineering.com/energy/us-midcontinent-rift-could-be-rich-source-of-hydrogen
From your second link –
I thought there were only three ways to get hydrogen – electrolysis, pyrolysis and steam reformation from methane. What’s the process involved here?
Well since it is in the realm of Middle Earth, you might look through some of Tolkien’s textbooks for the chemical equations. The information there dwarfs imagination.
If real, I would guess it falls under the process of pyrolysis. Hydrogen is very common in general but mainly or only in compounds with other elements on the surface of the Earth. There is considerable heat and pressure at depth under the surface so the belief may be that the decomposition of various materials under that heat and pressure, without any free oxygen, might leave free hydrogen behind.
Now all they need to do is figure out how to store and transfer vast amounts of the stuff without containers or pipes leaking or exploding.
Highly likely to be as useful as Unicorn Farts with the exception of some local use.
https://thebulletin.org/2024/03/golden-hydrogen-or-fools-gold/
When one burns hydrogen, what happens? O2 is consumed and H2O is produced (simplified, of course). So, what then replenishes the O2?
With CO2, plants (simplified, of course) do the job.
So burning H2 for thousands of years means (a) we drown in water, or (b) we suffocate.
Hydrogen, as a fuel, is expensive and dangerous. But the long term consequences have not even been looked at, let alone a full analysis of the impact to the planet.
Not only that, water vapour is a major green house gas!!
That was included in “drown.”
That aside, there is no such thing as a greenhouse gas. It is an expression used, certainly, because the atmosphere works something like a greenhouse and people prefer easy to remember expressions and soundbites.
There is no such thing as an automobiles because the correct designation is horseless carriage.
I don’t know the correctness of the estimates but if I recall correctly an article or two have been written addressing that question. The conclusion is that if all the potentially burnable carbon compounds on the Earth, meaning all FF, all plant and animal life on land, in the soil, or in the waters, and all “sequestered” carbon compounds everywhere were to be burned, the O2 content of the atmosphere would decrease by less than 1%.
Without actually drilling there, how do the engineers know whether the cavities under the Mid-Continent Rift contain hydrogen or natural gas?
Actually, it would be better for energy production if they contained natural gas. On a per-volume basis (at the same temperature and pressure) methane has a heat of combustion 3.2 times higher than that of hydrogen.
Political interference…
Republicans ‘outraged’ as Labour sends 100 staff to help Harris
Plan is ‘outrage’, Republicans say, and could damage relationship with UK if Donald Trump wins
https://www.telegraph.co.uk/politics/2024/10/17/labour-sends-staff-help-democrats-us-election-kamala-harris/
Harris is doomed LOL
Sesame Street Harris – brought to you by the letters R and U; and the number 0[IQ]
“”Ukraine is a country… Russia is a bigger country…””
by a landslide, IMHO
At this point a moldy cheese sandwich should be able to win against trump. But I guess never underestimate the power of propaganda. And swaying half an hour to music instead of answering questions.
Are you going to cry yourself to sleep when Trump wins?
Americans better cry themselves to sleep if that happens.
Guess they got tired of democracy and now want their own strong leader.
I’m certainly tired of democracy.
Me too. I want a return to our Constitutional Republic, not some liberal democracy resulting in one-party autocracy with command economics and socialism where we have nothing but are “happy.”
Hit the nail on the head! Thank you!
Certain Users certainly will cry to sleep. The Kamal Kabal is sinking rapidly in the poles. The latest Polymarket poles has Trump up 61% to Kamala’s 38%
Democracy is under attack, but NOT by Trump.
It is the far-left lies and destruction of reliable voting systems,
The import of illegal immigrants to bend votes etc .
The removal of ID for voters
The hiding of information on laptops,
The FAKE lawfare by the far-left against trump…
Trump WANTS democracy, the democrats are fighting fervently against democracy.
“and now want their own strong leader.”
Ah… so you are saying Trump WILL win.
Well done.
Trump had 4 years to cause harm and ruin;
Harris had 4 years to help and make things better.
Neither happened. Why do you think 4 more years of either actor would lead to a different outcome?
While it isn’t highly likely, Trump might have learned enough during the last four years years to know how to get more done in an effective manner.
A moldy cheese sandwich would certainly be preferable to a Kamala term and could likely as not string together a coherent sentence especially String Cheese
“a moldy cheese sandwich should be able to win against trump”
LOL.
You have just admitted that the Kamal is far less than a mouldy cheese sandwich.
You are an idiot !
You are absolutely correct. But the only reason is because democrats will register anyone, including dead people, and anything, including moldy cheese sandwiches, to vote. Never underestimate the power of fraud and corruption.
Mr. Etam, I live a few miles away from the Cove Point natural gas export terminal, built in the 1970s as an import terminal but changed to export a few years ago at a cost of several $billion. Large gas storage tanks are visible from the peak of a bridge over the Patuxent river. I do not know whether these tanks provide any long term storage or whether they are sized to hold just an export ship worth of LNG, but they are big. Also, the facility has its own 600MW (I think) electric power plant probably powered by natural gas to run the liquifiers and whatnot. The builders knew enough to not depend on the local grid to supply such a large demand.
I thought there is a nukular PP in that vicinity? It only runs data centers and AI computers?
There is the Calvert Cliffs Nuclear Power station almost next door to the LNG export terminal. It consists of two reactors which provide power to our local grid, Baltimore and elsewhere. You are probably thinking of Three Mile Island near Harrisburg, PA. It was also a twin power plant built decades ago but one of them, unit 2, suffered a terminal accident long ago. Unit 1 continued running until 2019 (I think) when it was shut down because it became uneconomic as a fill-in power source for erratic wind and solar. I believe Microsoft is purchasing TMI-1 to restart for AI purposes.
The Cove Point LNG Terminal has a storage capacity of 14.6 billion cubic feet (BCF) and a daily send-out capacity of 1.8 BCF. A typical LNG vessel carries 3.5 BCF of natural gas equivalent. That’s 1TWh of gas.
So it can produce a shipload every 2 days and store a week’s production. Feed to the plant may not be consistent enough to run at capacity, certainly continuously.
The CAGW clowns are going to lose but we aren’t pushing nearly hard enough. We can’t just sit on our backside and wait for it to happen. They are lying and cheating and we need to show the world how corrupt they are.
Part of the world already knows. Most of the part that doesn’t cannot be swayed by evidence.
“Because the LNG trade is anchored by multi-billion dollar terminals, which often require multi-decade contracts in order to obtain financing, much of this demand/trade is being baked into the system for decades to come”
There is a tremendous amount of capital investment required for an LNG export terminal. Natural gas as a vapor has to be desulfurized (removing H2S), then dried, then sent to a cryogenic fractionation tower to remove ethane and propane.
Once it is purified, the nearly-pure methane has to be chilled to about -162 C (-260 F) to be liquefied at atmospheric pressure. This requires a series of cascaded refrigeration steps, each of which requires large compressors, which also require energy to run them, and large air-cooled or water-cooled heat exchangers to condense refrigerant.
It usually takes several years for engineers to design an LNG export plant, and contractors to build it, and some months to start operation. The decision to build an LNG plant cannot be made lightly, due to the cost and time required to build it.
For this reason, the Biden/Harris administration’s decision to freeze development of LNG terminals in the USA was a catastrophic blunder, with billions of dollars tied up in partially completed LNG export terminals based on the whim of one man whose ability to think clearly is very limited.
If the USA is to participate in the anticipated LNG boom, they must elect Trump, who could turn this around with the stroke of a pen on January 20, 2025.
The irony here is that the current Liberal government in Canada keeps telling the populace that we all have to work toward Net Zero by 2050; yet that same populace is far more concerned with energy costs and security than some evidently unattainable targets. This is one of the main reasons that polls are currently showing that if an election were held today, the Conservatives would capture 42% of the popular vote, while the Liberals would attract only 23%.
Oh dear it’s worse than they thought with their Great Transition-
Gas industry in damage control as landmark study finds LNG ‘worse than coal’ for the climate (msn.com)
story tip
When I read and clicked on the article rating – it said: You cannot rate again ??
This is the first time I have seen this article. But this is not the first time this has happened… probably 50% of the time when I read a new article on WUWT it says: “You cannot rate again”, when I click on the rating stars. Anyone else have this problem ? It’s not the end of the world, but it’s just annoying!
I love WUWT, and for a long time too, but it’s just a little annoying!