An artistic rendering of Pacific NorthWest LNG proposed liquefied natural gas export terminal on Lelu Island, near Prince Rupert in northwestern British Columbia.
Canada's liquefied natural gas developers will band together and merge projects like producers in Papua New Guinea are trying to do as a price crash limits cash for individual export terminals, according to IHS Markit Ltd.
Producers must also green-light projects now so they can start by 2022, when the market will be in deficit, according to Bob Fryklund, the consultancy's chief upstream strategist. Companies involved in those projects should share facilities to produce LNG, like Exxon Mobil Corp. has proposed for its venture in Papua New Guinea with Total SA and Oil Search Ltd., he said. At least 20 export proposals in Canada haven't reached final investment decisions, according to Bloomberg New Energy Finance.
"Papua New Guinea is going to end up with one liquefaction plant and some people own individual trains. That is probably the model that will happen in Canada," Mr. Fryklund said Thursday in an interview in Tokyo. "It's a competitiveness issue, there is still some consolidation going on among the operators."
Royal Dutch Shell PLC., Exxon Mobil and Chevron Corp. are all involved in separate LNG proposals in Canada. Malaysia's Petroliam Nasional Berhad received conditional approval last month for its proposed $27-billion (U.S.) Pacific NorthWest LNG project, though it hasn't yet decided whether to move forward with the project.
Spot LNG in northeast Asia, which rose 2.2 per cent to $6.95 for every million British thermal units on Oct. 24, has fallen by about two-thirds from a peak in 2014 as new projects boosted supply faster than demand has grown. As a result of the glut, the global industry hasn't approved a new onshore greenfield development since December 2013, according to Wood Mackenzie Ltd. analyst Chong Zhi Xin.
In Mozambique, where one of the world's largest LNG projects is awaiting a final investment decision, there may be additional consolidation, according to Mr. Fryklund. Exxon Mobil is buying a stake in Eni SpA's offshore Rovuma Basin there, state-owned Empresa Nacional de Hidrocarbonetos Chairman Omar Mitha said Oct. 20. The purchase could spur development of export projects in the African nation, according to Mr. Mitha.
Assuming operators finalize approvals next year and begin construction in 2018, the earliest any of Canada's LNG projects could begin producing would be 2023, according to BNEF analyst Anastacia Dialynas.
Most of the new global LNG export capacity will come from the United States, according to Mr. Fryklund. The United States sent its first cargo produced from shale from the lower 48 states in February.
Earlier this month shipper Cheniere Energy Inc. was cleared by U.S. regulators to start loading tankers with LNG from a second plant at its landmark Sabine Pass terminal in Louisiana. The company plans to bring a third plant online and start the commissioning of a fourth next year.
"There will still be LNG projects going forward but it has to be extremely competitive," Mr. Fryklund said. "The bulk of the new LNG is still going to come out of the U.S. Gulf Coast."