Canada targeting Japan for new LNG exports - minister

CALGARY, Alberta, Sept 19 Wed Sep 19, 2012 11:58am EDT

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CALGARY, Alberta, Sept 19 (Reuters) - Japan will emerge as a top market for Canadian liquefied natural gas as developers gear up to export more than 9 billion cubic feet a day, the equivalent of nearly all the gas that flows from Alberta's gas fields into its massive pipeline network, Canada's natural resources minister said.

Five LNG plants are currently planned for Canada's Pacific Coast, and two of those already have 20-year gas export licenses, Natural Resources Minister Joe Oliver said in an interview from Tokyo. The one snag so far has been the inability of the developers to sign up customers.

Japan is already the world's largest importer of LNG. Its moves to cut its reliance on nuclear power present a golden opportunity for Canadian LNG, an industry now in its infancy, Oliver said. He was in Japan for an LNG producer and consumer conference, where he spoke to investors.

"We represent an attractive potential market and they represent a market of some considerable size - 33 percent," he said, referring to the country's percentage of global LNG demand. He pointed out that South Korea, the next stop on his Asian visit, accounts for 15 percent of demand, he said.

Companies in Alberta, the largest Canadian gas-producing province, inject more than 9 bcf a day into TransCanada Corp's pipeline network. That supply is used in Canadian and U.S. markets, and is currently fetching prices just above 10-year lows.

Japanese companies are among several from Asia that have announced investments in both LNG facilities and production assets in British Columbia, the western province that is the site of such massive shale gas regions as the Montney and Horn River.

In May, Mitsubishi Corp joined a consortium led by Royal Dutch Shell PLC to develop a 2 billion cubic feet a day liquefaction plant at Kitimat, British Columbia, that would come into service around 2020.

Japanese investors, including Mitsubishi Corp, Toyota Tsusho Corp and Inpex Corp have partnered with Canadian producers to develop British Columbia gas fields.

Despite the interest in LNG, which Canadian companies pressured by weak North American prices see as a way to boost the value of their production, none of the developers has sanctioned a project.

Analysts have said one hurdle is resistance among Asian buyers to sign long-term contracts for supply linked to oil prices.

"That's one of the issues - the huge price differential between North American prices and international prices. That's the nature of negotiations," Oliver said.

Shell Chief Executive Peter Voser has warned that Canada likely has only to the end of this decade to build up its LNG industry or face being overtaken by other countries looking to cash in on the booming Asian demand.

"There is, in my mind without a doubt, a role for Canada to play in this marketplace. But they're not going to wait forever, and so we've to get moving," Oliver said. "Fortunately the signs are very positive about our moving, so we should be up and running before the end of the decade, but starting to export before then."

He acknowledged there is much less opposition among aboriginal groups and the public in British Columbia to LNG projects than there is to pipelines to ship oil sands-derived crude to the West Coast.

"Some people believe that the risk to the environment is less, also natural gas emits less greenhouse gas emissions," he said. "And I don't think it's irrelevant that these projects are all within one province."

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