Use of Liquified Natural Gas (LNG) has been growing rapidly in the Asia-Pacific region, mainly as an energy source for electric generation but also for distribution to residential, commercial, and industrial consumers. Growth in LNG use has been strongest in Japan, Korea, and Taiwan, which together accounted for 86% of Asia-Pacific LNG trade in 2009. China and India, which are also becoming important LNG markets, represented 13% of LNG trade in the region in 2009 but are expected to account for an even greater share in coming years.

LNG prices in the Asia Pacific region are generally indexed to the Japan Customs Cleared price for crude oil imports, which closely follows the price of Brent (North Sea) crude oil. Because LNG prices there are approximately 90% of the oil price on an equivalent-heating-value basis, they are considerably higher than North American gas prices. LNG exports to Asia would allow Canadian gas producers to benefit from this price differential.

Until now, Canadian gas producers have only exported gas via pipeline to markets in the United States. However, it is becoming difficult to maintain (let alone grow) export volumes to the United States because US gas production has increased remarkably as the result of technologies that have made development of tight gas and shale gas resources commercially viable.  Moreover, this increase in the United States? domestic supply of gas has reduced gas prices and, similarly, netbacks to producers exporting gas to the United States.

Fortunately, Canadian gas producers have an opportunity to develop markets in Asia where buyers are seeking stable, long-term LNG purchase agreements with reliable gas producers in politically stable countries such as Canada.

However, a variety of policies stand to impede development of the infrastructure that will be required to export liquefied natural gas (LNG) to markets in the Asia-Pacific region via British Columbian ports. Most of the natural gas supplies are expected to come from northeast British Columbia, which has an immense amount of tight and shale gas resources. However,  some of the gas could eventually also be brought from northwest Alberta, the southeast corner of Yukon, and other regions.

To assess the economic impacts from exporting LNG to markets in the Asia-Pacific region, we developed a development scenario compatible with the National Energy Board?s most recent long-term forecast of BC natural gas production.