Ernst & Young: Liquefied natural gas market needs to be bolstered by joint ventures

By Rob Starr, Content Manager, Big4.com

A new Canadian Ernst & Young report says joint ventures (JVs) and partnerships could decide between capitalizing on global liquefied natural gas (LNG) opportunities in Asian demand markets and losing ground to foreign suppliers.
While Canada has immense domestic gas reserves, it lacks the population to consume the supply. With reduced demand from the US — Canada’s only external customer — following the shale boom as well as sustained low gas prices,  Canada is facing limited opportunities for LNG development.

An estimated CDN$50-billion  investment will be needed over the next 5 to 10 years if Western Canadian producers are to take full advantage of opportunities in Asia. But LNG projects can be too big and too risky for companies to tackle .

Pursuing JVs and partnerships will allow Canadian companies to accelerate their LNG plans. However, with JVs and partnerships also come many complexities. Companies must consider the various aspects of their business operating model, including strategy, business processes, information systems, structure and governance, leadership people management and corporate culture. All will be critical for success.

Lance Mortlock, of Ernst & Young’s oil and gas practice comments:

Total Pacific basin demand is expected to rise from 120 million metric tonnes today to 241 million metric tonnes per annum in 2020, and exporters in Australia, Russia, Malaysia and Qatar have been quick to respond,” he says. “These countries are already well on track to developing the necessary infrastructure to fulfill the needs of this expanding market — leaving little room for Canada.”