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The site of the Woodfibre LNG project, a proposed small-scale liquefied natural gas (LNG) processing and export facility, with a salmon bearing stream on the left in Squamish, British Columbia, Wednesday, July 23, 2014.

Rafal Gerszak/The Globe and Mail

WHAT IS LNG?

Liquefied natural gas is an increasingly important pillar of the global energy industry.

Long used to heat homes and power industry, natural gas is traditionally extracted from the ground and shipped through pipelines.

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But in recent decades, some of the world's largest energy companies started shipping gas between continents by feeding those pipelines into enormous export terminals. There, the natural gas is run through a production "train" that supercools the gas into a liquid one-600th the size of its gaseous volume – essentially, from a beach ball of gas to a Ping-Pong ball of liquid.

It then becomes economical to ship that liquefied gas on specially built transport ships with huge domed tanks to energy-hungry countries willing to pay top dollar.

It is generally considered a cheaper, greener form of energy than oil. Global demand for LNG is predicted to nearly double between 2012 and 2030, Ernst & Young says.

WHO ARE THE PLAYERS?

Because of the huge cost of building facilities, LNG projects are usually the result of negotiations between oil and gas suppliers operating in resource-rich countries with sparse populations (such as Australia) and large purchasers in densely populated, relatively resource-poor countries (such as Japan).

In the Persian Gulf, Qatargas has helped Qatar become the world's largest LNG exporter, while Malaysia's Petronas has propelled the Southeast Asian state to No. 2 globally.

In Australia, the No. 3 global producer, firms such as Shell, ExxonMobil, Woodside, Santos, ConocoPhillips and others have signed contracts with energy companies in Asia: Japanese firms such as Kansai Electric and Tokyo Gas and large Chinese energy firms such as China National Offshore Oil Corp. (CNOOC) and China Petroleum & Chemical Corp. (Sinopec).

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WHAT IS HAPPENING GLOBALLY?

Current demand for liquefied gas is coming mainly from industrialized Asia: Japan, South Korea and Taiwan alone account for more than half of global demand, according to Ernst & Young. In Japan, in particular, opposition to nuclear power in the wake of the Fukushima disaster has spurred demand. But China's interest in natural gas is also increasing because of efforts by the state to move its energy supply away from an overwhelming reliance on coal.

Australia, already an LNG powerhouse with multiple export terminals, is building out even more. But the biggest development is in the United States, where shale gas is reshaping the global energy industry. Because of the vast U.S. reserves, existing local expertise, and U.S. import facilities that can be turned into export hubs faster than new export facilities can be built in Canada or Australia, producers in the U.S. have a huge advantage over projects being built elsewhere.

WHAT IS HAPPENING IN B.C.?

In British Columbia, Premier Christy Clark's government has staked its reputation on the development of multiple LNG proposals up the province's rugged coastline, hoping for an economic boom that can create jobs and pay down the provincial deficit.

But none of the companies involved have yet made a "final investment decision" and committed to building. And the CEO of Petronas, one of the largest and most credible potential investors for B.C.'s nascent LNG sector, has just voiced uncertainty about the roughly $10-billion project in the wake of U.S. developments and the B.C. government's proposed tax regime.

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For roughly two years, the B.C. government has mulled the tax framework under which the producers will operate. But in addition to that, the potential projects have faced intense opposition from local environmental and aboriginal groups who think tankers off their pristine coast will lead to an ecological disaster. For now, the industry remains largely theoretical.

WHAT DOES THE FUTURE HOLD?

But as Canadian projects stall, the global energy landscape is shifting – and not in a way that benefits hopeful producers in Canada. Australian producers are ramping up production and new projects are developing in East Africa. And while Asian demand is increasing, the largest buyers are beginning to play coy with negotiations because of U.S. developments, which could cause prices to drop.

Geoffrey Cann, a Deloitte consultant based in Brisbane, says cheap gas in the U.S. will cause Asian purchasers to wait longer before signing contracts, sign much shorter supply contracts and sign contracts for lower volumes. This is a challenge for new greenfield projects in Canada, which face steeper costs than brownfield sites that can expand capacity by adding new "trains" to existing facilities.

"It does seem to be taking a devilishly long time," Mr. Cann said. "The march on the next round of contracts is going to elude the Canadians."

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