Impact of Covid-19 on LNG sector in Canada

GlobalData Energy 27 August 2020 (Last Updated August 27th, 2020 14:30)

Impact of Covid-19 on LNG sector in Canada

The advent of Covid-19 has disrupted the financial stability of many a sector and Canada’s LNG sector is no exception. Sharp fall in gas prices and LNG supply glut compounded by the pandemic have forced companies to delay LNG projects in the country. Besides, prevailing market conditions are making it difficult to find investors even for projects in Western Canada, which are relatively closer to some of the biggest LNG buyers in Asia such as China and Japan.

Poor economic outlook and battered demand of oil and gas have led to delayed financial investment decisions (FIDs) resulting in deferred timelines of upcoming LNG projects. Developers of Woodfibre LNG project have delayed the start of the construction by a year to 2021, due to unforeseen challenges caused by the pandemic. In April 2020, Pieridae Energy postponed the FID of its Goldboro LNG export plant in Nova Scotia, pushing the start of the project probably by a year to 2025.

Participants of Canadian LNG projects have been reducing their overall capital expenditure for 2020. Royal Dutch Shell Plc, Chevron Corporation, Petroliam Nasional Bhd, and Woodside Petroleum Limited have revised their capex guidance in response to weak market conditions due to Covid-19 pandemic.

Rising competition from new projects coming online in the mid-2020s across the globe amid a supply overhang might make it challenging for Canadian LNG producers to remain cost competitive. Additionally, the country’s LNG sector has to come up with strategies to thwart competition from upcoming LNG suppliers in the US and Africa.