This is according to a major new report into one of Australia's emerging LNG rivals.
Canada has the potential to become a major LNG exporter, pushing an astonishing 325 million tonnes per annum of product into the market, but so far none of the 22 proposed LNG projects has been able to achieve a financial close, and little wonder since the lion's share appears to be need a $US81 per barrel oil price just to break even - and that includes Woodside's new Kitimat LNG interest.
British Colombia
Of the 22 proposals 17 are in British Colombia and according to a new report from the International Center for Natural Gas Information, Cedigaz, the Canadian projects are hampered by their need to compete with US brownfield projects, which have access to cheap gas, significant infrastructure and existing import facilities that can be upgraded for export.
That leaves the Canadian projects with big gas resources that rely on oil-linked pricing for their viability, and in a falling oil price environment Canada has limited commercial appeal, which explains the postponements of FID decisions in recent times.
Cedigaz's latest report, Waiting for the Next Train? An Assessment of the Emerging LNG Industry in Canada, discusses Canada's LNG future, looking at the initial enthusiasm and wide support by public authorities and local communities but also at the economic challenges and commercial issues that are slowing the progress of these projects.
It found that the British Columbia projects are capital-intensive, as many are planned on greenfield sites without easy access to upstream developments nearby or the necessary transport infrastructure.
There's a need to build pipelines up to 900km long to simply get the gas to the coast, costing anywhere up to $8 billion.
That's not a problem in Texas, at all.
Further, US onshore fields are better understood, whereas the BC projects are mainly sourced from yet-to-be-developed unconventional plays in the Western Canada Sedimentary Basin, where available data show important variations in productivity from one well to another.
It means the cost of feed gas is unclear as well.
In order to assess the economics of British Columbian projects, Cedigaz modelled a typical 12.8MMtpa plant and computed the total cost of LNG delivered to Japan at three price points.
Its base case assumptions show that the LNG price in Japan should equal $US11.8/MMbtu to recover all costs with upper and lower prices of $US8.6/MMbtu and $US16.1/MMbtu.
The spot price for LNG in Japan last month averaged $US7.60 per million British thermal units, down from $10.20/MMbtu in February.
Japan's Ministry of Economy, Trade and Industry is due to release its April figures any day, and is expected to show a further fall in the Japanese landing price.
Canadian LNG projects require a minimum oil price of $US81/bbl to simply breakeven on most scenarios, and in the best case can survive at $59/bbl.
The Canadian option doesn't look good, especially when going against US Henry Hub indexed LNG plants.
Cedigaz looked at the historical data, and said that with the exception of 2008, oil prices have been either too low for the BC LNG projects to breakeven in its base case or too high relative to the Henry Hub price to compete with brownfield Gulf of Mexico projects.
Cheniere Energy's advancing Sabine Pass can deliver gas into Japan at between $10.3/MMbtu and $11.05/MMbtu.
The challenge for BC LNG projects is therefore to combine profitability and competitiveness with US LNG projects.
The report says that the Pacific Northwest LNG, LNG Canada, Goldboro LNG, and Douglas Channel LNG are leading the race, and that Canada could export 34MMtpa of LNG by 2035, but that leaves a lot of projects will never proceed.
Pacific Northwest LNG and LNG Canada hope to reach FID this year and Goldboro LNG, and Douglas Channel LNG next year.
Australian exposure
While they may be possible, Cedigaz puts Woodside Petroleum's recent entry, assuming the purchase of Kitimat from Apache goes though, as one of seven challengers.
Kitimat LNG, which owns about 15Tcf of resources in the Horn and Liard Basin, will have to invest massively to develop its resources.
It was once leading the pack before being seriously undermined by Apache's withdrawal.
Woodside's new 50% share could bring the project a renewed sense of energy, however it and partner Chevron will still need to sign up buyers and possibly equity partners, not an easy task in the current environment.
Kitimat's plant and pipeline environmental assessments have been approved and the venture has been granted a 10MMtpa 20-year export license, one of the few approvals secured by Canadian LNG projects to date.
Woodside taking on Kitimat means its Grassy Point LNG proposal, for which it is the sole proponent and does not have associated resources, is probably now dead in the water.
Minnow Liquefied Natural Gas's Bear Head LNG sits in the speculative projects.
Cedigaz says LNGL has yet to get a project to FEED anywhere in the world, so its 8MMtpa project in Canada is highly speculative.
LNGL is hoping to make its decision next year, and plans import gas from the United States through the Northeast and Maritime Pipelines.
Of course, Bear Head is at early stage of development, but it is also late compared to similar proposals and doubts can be raised regarding the ability of LNG Limited to bring the project to fruition.
Shell impact
The merger between Shell and BG Group also raises some interesting questions.
For a while, BG's 21MMtpa Prince Rupert LNG project was considered as a serious proposal for British Columbia exports, mainly because of BG's experience in the LNG business, but in October the project was put on hold.
Given it needs to find buyers, has already agreed to purchase US from Sabine Pass LNG and Lake Charles LNG in the US to meet its global gas sales agreements, and would need $8 billion to build a pipeline, Shell, if it wants to go ahead with Canadian LNG projects, may prefer to focus on its $26-36 billion 26MMtpa LNG Canada with PetroChina (20%), Mitsubishi Corporation (15%) and Kogas (15%).
Canada LNG's first phase, for 6MMtpa, is said to be on track and FID could be taken in 2016, after all studies are completed.
