British Columbia ends 2015-2016 with larger-than-expected surplus

[Alex Mackinnon]

Originally Posted by Tfreder

You do have to give Clark the benefit of the doubt, as I doubt many people could have predicted the collapse in oil and gas prices we've experienced in the past few years. If it wasn't for that, which was completely out of her control, her LNG plan would have been a huge boost for our economy.

No, her number wouldn't have panned out, and you really shouldn't give her the benefit of the doubt.

She cherry picked her numbers, using the LNG prices as they spiked immediately following the Fukushima meltdown and shutdown of all Japanese nuclear reactors.

Christy is a political shark. It was pretty obvious that those LNG prices wouldn't last. I'm sure she knew that, but it was a political ploy and it worked.

[Stingray2004]

Originally Posted by Alex Mackinnon

No, her number wouldn't have panned out, and you really shouldn't give her the benefit of the doubt.

She cherry picked her numbers, using the LNG prices as they spiked immediately following the Fukushima meltdown and shutdown of all Japanese nuclear reactors.

Christy is a political shark. It was pretty obvious that those LNG prices wouldn't last. I'm sure she knew that, but it was a political ploy and it worked.

That's not exactly how it works. The fully integrated LNG model (Australia/Canada, for example) relies upon long-term contracts, which are typically JCC-linked with a 13% - 14% price slope. ~90% of all LNG volume in these LNG terminals are based upon same. Nothing to do with "spot" prices, which is another entire LNG market altogether.

Even before Fukushima, the LNG majors issued FIDs on Aussie LNG projects as the then (roughly similar to today) spot price was immaterial to their respective decisions.

BTW, now that the Petronas LNG consortium has received final CEAA enviro certification, I'm actually quite confident that final FID will be issued as early as December, 2016. Why? All LNG produced is already spoken for (according to sources) and the proponents are end-users themselves. Hell, they already have ~$20 billion in CAPEX to date into PNW LNG - major coin.

On that note, while Royal Dutch Shell has delayed it's FID for its Canada LNG project, global head van Beurden recently publicly stated that the project is still economic over its 40-year time horizon. It will eventually move forward as well as it has a very strong set of consortium partners.

The main reason Shell delayed their FID was due to the fact that they purchased the BG Group earlier this year at a CAPEX of ~$55 billion incorporating their LNG assets. As a result, Shell's gearing substantially increased and they need to lower same and are avoiding any major CAPEX currently as a result.

[Alex Mackinnon]

Originally Posted by Stingray2004

That's not exactly how it works. The fully integrated LNG model (Australia/Canada, for example) relies upon long-term contracts, which are typically JCC-linked with a 13% - 14% price slope. ~90% of all LNG volume in these LNG terminals are based upon same. Nothing to do with "spot" prices, which is another entire LNG market altogether.

Even before Fukushima, the LNG majors issued FIDs on Aussie LNG projects as the then (roughly similar to today) spot price was immaterial to their respective decisions.

BTW, now that the Petronas LNG consortium has received final CEAA enviro certification, I'm actually quite confident that final FID will be issued as early as December, 2016. Why? All LNG produced is already spoken for (according to sources) and the proponents are end-users themselves. Hell, they already have ~$20 billion in CAPEX to date into PNW LNG - major coin.

On that note, while Royal Dutch Shell has delayed it's FID for its Canada LNG project, global head van Beurden recently publicly stated that the project is still economic over its 40-year time horizon. It will eventually move forward as well as it has a very strong set of consortium partners.

The main reason Shell delayed their FID was due to the fact that they purchased the BG Group earlier this year at a CAPEX of ~$55 billion incorporating their LNG assets. As a result, Shell's gearing substantially increased and they need to lower same and are avoiding any major CAPEX currently as a result.

It seems like you're on the finance side of things, while I'm on the technical side.

Aren't gov't revenues are generally coming from the extraction royalties of the NG, rather than from the LNG plants? Those revenues are loosely tied to the spot price price by some type formula, aren't they?

My source was primarily Marc Jaccard suggesting that there is probably going to be a glut of LNG on the market, and that we're not a low cost producer by most counts.

[Stingray2004]

Originally Posted by Alex Mackinnon

It seems like you're on the finance side of things, while I'm on the technical side.

Aren't gov't revenues are generally coming from the extraction royalties of the NG, rather than from the LNG plants? Those revenues are loosely tied to the spot price price by some type formula, aren't they?

My source was primarily Marc Jaccard suggesting that there is probably going to be a glut of LNG on the market, and that we're not a low cost producer by most counts.

The LNG spot price is highly/extremely variable as witnessed by its peak of ~$19 MMBtu a few years ago - not relevant to the BC taxation model. Even at that time, JCC-linked contracted LNG was selling at a much lower price. BTW, most of these JCC-linked contracts also contain an S-curve for price floors/ceilings.

This BC gov't .pdf provides some good insight into how the LNG taxation model will function based upon an LNG facility with a capacity of 12 million/tons annum (which is the initial capacity of both PNW LNG and Canada LNG):

http://www2.gov.bc.ca/assets/gov/tax...esentation.pdf

In terms of installed per million ton capacity, ambient temperature, upstream liquids rich nat gas, shipping times, taxation regimes, political stability, etc., BC is viewed as potentially a very competitive LNG supplier globally.

I am also a big fan of Mark Jaccard who is also a very likable guy. But Mark is basically an environmental energy economist and focuses upon carbon taxes, climate change, sustainability... that kinda stuff. And with those glasses is how he views LNG. Fair enough.

But Mark is not an LNG expert by any stretch of the imagination as it is not his forte.