As North American companies begin breaking into the global LNG market, those engaged in joint ventures will be better positioned to compete with exporters around the world, according to a May 10 report from Ernst & Young.
"Joint ventures and partnerships could make all the difference between capitalizing on global liquefied natural gas opportunities in Asian demand markets and losing ground to foreign suppliers," Ernst & Young said in a news release. "[C]ountries around the world are capitalizing on Asian LNG demand and fast becoming powerful threats to potential Canadian market share."
Demand in the Pacific Rim is expected to rise from 120 million tonnes per year today to 241 million tonnes annually in 2020, the firm noted, saying that exporters in Australia, Russia, Malaysia and Qatar have been quick responders to the growing market.
For Canada to take full advantage of its opportunities, it will likely need approximately C$50 billion in industry investments over the next five to 10 years, according to the report. To take on major LNG projects, companies may need to look to partnerships if they want to compete globally in the near term.
The study recommended that Canadian companies leverage existing Asian investment from companies that have made investments in western Canadian upstream assets, looking to SINOPEC, PetroChina Co. Ltd., Korea Gas Corp. and Mitsubishi Corp., among others. Asian and Canadian companies can benefit from the integration of their value chains and establishing long-term contracts, the report noted, adding that the Western Canadian Sedimentary Basin tends to have higher costs associated with LNG production than other areas of the continent.
Canada's gas pipeline infrastructure will need to catch up to proposed LNG export projects, especially compared with the pace of development occurring in other gas-exporting countries, the report said.
Copyright 2012 SNL Financial LC. All Rights Reserved.
(Originally published May 11, 2012, in SNL Daily Gas Report.)