Canada seen beating U.S. in $150 billion Asia LNG race

Doubling Demand

“In the long term, Canada, which carries lower political risk, is probably more positively seen than the U.S. projects,” Asish Mohanty, senior LNG analyst at Wood Mackenzie Ltd. in Houston, said in a telephone interview. “The political risk of U.S. LNG is probably going to outweigh the benefits.”

Energy companies chill gas to -160 degrees Celsius (-256 Fahrenheit) to create a colorless liquid 1/600th of its original volume for long-distance shipment aboard tankers twice as long as Seattle’s Space Needle is high. Worldwide gas demand is expected to more than double by 2035 to 6.6 trillion cubic meters (233 trillion cubic feet) a year, according to the International Gas Union, a trade group based in Vevey, Switzerland and Oslo.

Global demand will begin to outpace LNG supplies around the end of this decade and may exceed production by 100 million metric tons (4.87 trillion cubic feet) annually by 2025, Chevron Chairman and Chief Executive Officer John S. Watson told analysts in New York last month.

Asia leads the world in the growth of demand for LNG as Pacific Rim economies expand power generation and energy-hungry manufacturing sectors, Watson said during the March 12 event.

$150 Billion

Kurt Glaubitz, a Chevron spokesman, didn’t return a voice mail left at his office requesting comment on Canada’s LNG outlook. Aaron Stryk, a spokesman for Exxon, declined to comment for this story.

“Petronas looks towards Canada’s stable fiscal and regulatory regime as a positive environment for investments of this magnitude,” as well as the country’s “vast” gas supply and short shipping times to Asia, Michael Culbert, chief executive officer of the company’s Canadian unit, said yesterday in an e-mail.

The Asia-Oceania region, excluding Australia, imported 8.847 trillion cubic feet of gas in 2011, the most recent year for which data was available, according to the U.S. Energy Department in Washington. At the $16.50 per million British thermal units that Japanese importers are paying for some supplies, that regional gas market has an annual value of $150 billion.

Market Reversal

As recently as five years ago, explorers and investors from ConocoPhillips to billionaire investor George Kaiser were predicting the U.S. would need to import LNG to meet domestic demand as output stagnated from its aging fields. Dow Chemical Co., Chevron and Total SA were among the heavyweights that signed long-term contracts for LNG import capacity along the Gulf Coast.

At the same time, a then-little-noticed revolution in drilling and hydraulic fracturing was under way that subsequently vaulted North American gas production to a record high, saturating local markets, collapsing prices and prompting would-be importers to look overseas for an outlet for swelling fuel supplies.

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