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Australia Pacific LNG’s export terminal on Queensland’s Curtis Island. The first LNG ship will be arriving in mid-2015. (Australia Pacific LNG)
Australia Pacific LNG’s export terminal on Queensland’s Curtis Island. The first LNG ship will be arriving in mid-2015. (Australia Pacific LNG)

The LNG race: The lessons Canada can learn from Australia Add to ...

On a warm evening in late February, on an island just off the coast of eastern Australia, workers started to pour the concrete roof of an enormous liquefied natural gas tank that stretches 90 metres in circumference and rises 10 storeys into the sky.

The workers toil away late at night to avoid the searing heat of Australia’s late summer sun. They had recently built the roof for an identical adjacent container, both part of the $24.7-billion Australian ($25.5-billion Canadian) joint venture Australia Pacific LNG, owned by American oil and gas firm ConocoPhillips Co., Australian energy giant Origin and China’s state-owned Sinopec.

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The two enormous tanks will hold natural gas tapped from the deep coal beds further inland and piped hundreds of kilometres to the LNG export terminal on Queensland’s Curtis Island. Facing the sheltered harbour of the industrial port city of Gladstone, the gas will be chilled until it condenses to one-six-hundredth of its original size – essentially from the size of a beach ball down to a table tennis ball – making it possible to load the liquid gas onto LNG carriers with enormous domed tanks and ship it off to the surging economies of Asia.

“I don’t know how many cranes we have out there, but it’s a bunch,” says Kent Anderson, ConocoPhillips’ project manager for Australia Pacific LNG. “It’s a good clean fuel and it just seems the world can’t get enough of it at the moment.”

The world is undergoing an LNG boom, and Australia is at the epicentre. Right next door to Australia Pacific LNG’s 3,600 workers on Curtis Island is a similar-sized, $20.4-billion (U.S.) LNG export terminal under construction for a project led by British-based BG Group. And next door to that is yet another project run by Australian energy firm Santos, worth about $18.5-billion. Remarkably, construction might begin on a fourth LNG project next to that one if Royal Dutch Shell PLC decides – amid global restructuring and approvals – to push ahead with it.

All of these huge Australian projects have long-term sales contracts with massive Asian firms such as Korea Gas Corp., Malaysia’s Petronas, Japan’s Kansai Electric and China National Offshore Oil Corp. (CNOOC).

Half a world away, meanwhile, there are bold plans to make Canada an LNG powerhouse, targeting many of the same Asian firms as customers. But Australia’s huge head start and the massive scope of its LNG projects - despite major cost overruns - threaten Canada’s success as it jumps into a global industry that promises to be intensely competitive.

Canada, or more specifically British Columbia, will be lucky to have three LNG export terminals by the end of the decade. Australia, on the other hand, has three LNG export terminals nearing completion in the small port city of Gladstone alone – and this is just one small corner of a surging Australian gas export sector that will likely help the country overtake Qatar as the world’s leading LNG exporter.

There is a lot of promise in British Columbia but relatively little happening on the ground. There are at least 14 B.C. LNG projects planned, but industry experts caution that launching just one project will be a major challenge. With B.C.’s delayed tax regime, environmental assessments, a lack of local infrastructure and complicated negotiations with First Nations, it remains unclear how many companies will stick it out. No final investment decisions have been made yet to build LNG projects on Canada’s Asia-facing West Coast.

LNG projects require massive levels of investment and each delay increases the likelihood of being squeezed out due to a looming gush of global gas supplies scheduled for 2018 and 2019. Companies will be facing pressure this year to make final investment decisions or miss the chance to export B.C. LNG.

Nevertheless, B.C. Premier Christy Clark and her provincial Liberal government hope LNG projects could pump $1-trillion (Canadian) into the economy over three decades, helping generate 39,000 construction jobs, as well as tens of thousands of other LNG-related positions.

Of the planned projects, Pacific NorthWest LNG project, headed by Malaysia’s state-owned Petronas, is the most likely to proceed to construction on Lelu Island near Prince Rupert. Another promising project is Kitimat LNG, owned by the Canadian units of Chevron Corp. and Apache Corp.

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