Late for the party – Updated

$40 Billion LNG Project In Australia Cancelled Amid Low Prices, Charles Kennedy, Oilprice.com, Mar 24, 2016

The crash in LNG prices has claimed a major victim. Woodside Petroleum and its partners, which include Royal Dutch Shell, BP, and PetroChina have decided to cancel a massive LNG project in Australia because the economics no longer work.

…Citing the “extremely challenging” market, the project was scrapped on March 22. “It’s very, very difficult for us to invest in this price environment,” Woodside’s CEO Peter Coleman said.

“We’ve got a glut of LNG at the moment and a large number of potential projects out there,” Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co., told Bloomberg in an interview.

…with LNG prices a fraction of what they once were, the decision does not come as a surprise. A handful of other large LNG export facilities that have been planned for Australia are also getting second looks. Browse had failed to secure any customers for its planned capacity, and with LNG prices now down to multiyear lows, it would be much more difficult for this project to turn a profit than for some competing projects that sealed contracts years ago.

The forces of no, or market economics?


We’re so lucky in BC. Aren’t we?

As to the libs’ staunch resistance to prudent counsel, advice they don’t want to hear?

Their logic is dazzling. If a project is made Too Big it can’t be allowed to fail. To guarantee inevitable success just make sure every project is Too Big to back away from.

There is one concept that pound foolish ideologues like Princess Enron, Stephen Harper, and his newly transferred acolytes are anxious to disinvent.

The fact of Business Risk

“The probability of loss inherent in an organization’s operations and environment (such as competition and adverse economic conditions) that may impair its ability to provide returns on investment. Business risk plus the financial risk arising from use of debt (borrowed capital and/or trade credit) equal total corporate risk.”

Despite proof after proof of losses – worldwide – how could the insistence upon further massive LNG investment now be anything less than a catastrophic error?

The typical the BC response? Confidence, “We’re Not Worried”.

Though it makes entertaining if financially absurd theatre, unfortunately for BC taxpayers, political grandstanding is irrelevant. It offers zero leverage and has no bearing on whether this effort will be seen later as either a brilliant initiative or a barking mad Ponzi scheme.

The argument that pushing massive projects like Site C still is “necessary” [says who? what are the facts?] and the belief that all those other LNG fantasies ever were invaluable to taxpayers now looks more like attempts to pretend that the risk of such investments failing simply doesn’t matter.

Like a sinking Titanic the bridge believes it can all be managed. Just Remain Calm.

To the passengers paying for this ride and noting the degree to which the ship is sinking this is one more resource exploitation managed by people with a ministerial track record of zero organizational genius and astonishing contempt for real oversight.

Reliance on PR to mask a non-stop string of failures to perceive economic and social reality? That’s just Politics…As usual, devoid of ministerial responsibility.

While other nations are shutting down mass expenditure plans, in China, Japan, South Korea, the US and elsewhere, the risk of failure increases for those still determined to make reality subordinate to ideology. An ideology which opposes realigning expenditures to suit reality looks more and more madcap and incompetent. Alice’s Tea Party.

We’re so lucky in BC. Aren’t we?

Categories: LNG, Natural Gas

17 replies »

  1. So the fools in charge of B.C. spent billions promoting gas, offered up decades long holidays from taxation and environmental regulations and got nothing in return?

    Nothing, that is, for the people of British Columbia. We have to admit the Liberals made out very well, in May 2013.


  2. Yes the supposed business party (the BC Liberals) are caught in yet another case of election promises proven to be huge falsehoods with no real clue about what they are doing. What business course anywhere on this orb considers selling any commodity while the price of said commodity is languishing at historically low valuations, to be remotely considered as a “best practice”? The buy low sell high concept is tried and tested, the sell low while giving cost certainty at prevailing low valuations can not be classified as anything approaching “sound business management”. Then to further expose the taxpayers and utility customers to a 10 billion dollar dam with no real domestic requirement for this energy for decades to come is somehow also a magic “best practice”?
    No private enterprise anywhere on this earth that has had a modicum of success has used the formula currently being used by the BC Liberals, ever. I suppose we are now to believe that the BC Liberals have a magic button that will increase the price of LNG by over 200%, all the savvy businessmen who have stalled and shelved their LNG projects are not wise nor remotely savvy?
    I'm a right wing business supporter, however I also have a keen sense of when I'm being fed codswallop. This LNG mess does not come close to passing any smell test, actually the stench is somewhat overwhelming right now. Keep up the great work Norm, many of us really appreciate the efforts.


  3. I don't know if you can get your hands on the info, Norm — but it would be educational to see Australian tax and royalty revenues collected from natural gas drilling and export.

    I suspect state and federal records would be needed. Also, you would need to separate national use from export use… perhaps by seeking pre-LNG records.

    (In your spare time, of course! Thanks again for all you do for the Forces of Know.)


  4. Apparently Australia doesn’t give away its natural gas in 25-year gift packages.

    Note the floating export facility that trimmed costs by 35 percent. That concept here might reduce costs by bypassing our workers and the Rupert rag-tag forces of no at the same time. But all indications are its still a non-starter. Unless Christy and Resource Rich are working on a plan to deliver our free gas free on board an Asian port of Najib’s choosing.


  5. if we believed in Easter miracles, we'd like to see this post's information as the lead item with the MSM. Oh, well I'd believe in the Easter Bunny first,

    Happy Easter!


  6. Reality for all but a few of the Press Gallery types comes through “rumblings” or, more honestly, words in the ear by pundit whisperers, the people who tame and train pundits by speech and gentle methods like fancy meals, rounds of golf and special liquids best consumed after the sun has settled below the horizon.


  7. http://www.afr.com/news/policy/budget/wa-debt-spirals-towards-unprecedented-39b-20151220-glsabf

    Could you imagine if the Vancouver Sun..The Province..Global BC and CTV BC reported 1/10th of Norm Farrell's work..Straight Goods research…Rafe Mair..Andrew Nikforuk…And a few other honest scribers work..

    Pitchfork and torch bearing persons would be lined up at British Columbia's legislature..

    But alas…I patiently await more announcements on modernizing BC's liquor scene..Get em drunk, keep em drunk and drown their thoughts in Postmedia corporate spin…..1 million news jobs by 2020…eer, oh yea, the BC Liberals moved the goalposts to 2023



  8. Hello Norm, According to the Star Online today ” KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) has confirmed it will be delaying the floating liquefied natural gas 2 (FLNG2) project to 2020 from 2018.”
    And about the BC LNG ” When asked about the status of the Canadian LNG project, Adnan said the group would make an announcement in the near future. “We would not dwell on that for now.”

    Meanwhile, Adnan said that it was now a buyers market in LNG due to the ongoing supply glut in the industry. However, he added that demand may outstrip supply if projects worldwide continued to be deferred.”

    I'm sure Rich Coleman would say we're on track…..Christy would say we're leading the Country in economic activity….. if that's the case why do we need millions in TV ads ? Maybe they're right… after all we can afford to send our Ferries to Poland for a retrofit as opposed to spending a bit extra here in BC & doing some training for future work. The money could come cancelling the TV ads.

    Guy in Victoria


  9. Remember that claim of leading the country in economic activity was based on:

    – huge shipbuilding projects that may proceed in eastern Canada and be deferred or substantially reduced in BC;
    – multiple LNG liquefaction plants being constructed although that is simply not happening.

    The authors of the underlying report, Conference Board of Canada, has been cashing big cheques from both the gas industry and the BC Government, which means their work was not an objective examination of the real world; it was based on Liberals' rosy hopes and dreams.

    Consulting has been described as the world's second-oldest profession. It may actually be the first.


  10. No one in the MSM would dare ask the Premier or any other Liberal MLA to walk us thru the statistics to date proving we are leading the Country. I mean after 3 months those huge figures should be available & verified by the MSM. If the government is relying on tax payer funded projects to keep BC alive then they are truly hypocrites. Can you imagine Joh Horgan suggesting spending on anything….. he & the party gets trashed for wreckless spending of tax dollars. Real Estate sales in Vancouver seem to be the only activity and it has nothing to do with the Liberals.
    BTW Norm, I tried to find in the BC budget an amount they have donated to the Conference Board… it must be hidden or lumped into miscellaneous. If anyone has the amount, it would be appreciated.

    Guy in Victoria


  11. Payments to Conference Board by B.C. Government
    per Public Accounts Detailed Expenditures

    2002 $58,193
    2003 $76,302
    2004 $81,480
    2005 $129,956
    2006 $201,817
    2007 $162,390
    2008 $357,675
    2009 $267,385
    2010 $-
    2011 $97,684
    2012 $-
    2013 $65,880
    2014 $119,008
    2015 $136,724

    Total $1,754,494

    This does not reveal the payments made by crown corporations and the many quasi-public agencies created to run the BC Liberal patronage regime.


  12. Further to my above comment….The Postmedia gang is so predictable, and so are the BC Liberals…I wrote this above..

    “But alas…I patiently await more announcements on modernizing BC's liquor scene..Get em drunk, keep em drunk and drown their thoughts in Postmedia corporate spin…..”

    This article just posted on the Vancouver Sun…(9:00 pm)


    Yea, everybody in British Columbia is swimmingly happy ever since the BC Liberals created happy-hour and cheap(er) drinks…

    My gawd Norm…it's almost like the BC Liberals read my comment on your site and called up their friends at Postmedia and ordered up a happy-hour booze article!


  13. I guess you went straight to the source for your figures, Norm. You know who to ask!

    A few weeks ago, I tried asking at the OTHER end, at the Conference Board of Canada, asking: “I'd be interested in seeing a list of your donors. Failing that… could you please tell me how much of your funding has come from the BC government since 2011? Thank you.”:

    They said: “You will find the information which is public about our charity at the following site. Our legal name is Aeric Inc.


    We have received no grants from the BC government as we operate on a fee for service basis.”

    Why would they refer me to the federal government's CRA site? I dug a little there and found that, while Aeric has “charitable status,” they have 27 directors/trustees (including a Lloyd Axworthy) — who surely don't volunteer their time.

    I next asked, “Let me rephrase my question: have you received funds from the BC Government since 2011 on a fee-for-service basis? If so, how much and for what services?”

    Their answer: “Unfortunately, we do not provide this information as it is not publicly disclosed.”

    Your list is far more instructive.


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