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Conference Board of Canada doubles down on its losing LNG bet

October 19, 2020
Melissa Brown and Norman Waite
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Key Findings

The Conference Board of Canada has reiterated and amplified its call for more Canadian liquefied natural gas (LNG) capacity in its recent report, A Rising Tide: The Economic Impact of B.C.’s Liquified Natural Gas Industry.

However, the Conference Board’s new report is just another example of how the vague hope of potential future Chinese demand can lead otherwise rational actors to disregard risk analysis and place large, short-sighted bets. The report’s projections double down on a Canadian LNG industry already in trouble before COVID and deserve careful scrutiny.

Executive Summary

The Conference Board, a non-profit economic research organization based in Ottawa, believes Asian, or more specifically, Chinese demand growth can sustain a further leap in British Columbian LNG capacity growth, despite corporate investors already folding their hands.

Rising Tide’s exaggerated demand assumptions and disregard for China’s manifest price sensitivity are the fatal misunderstandings of its argument. Rising Tide fails to recognize that the deck is already stacked against Canadian LNG, and that China is improving its odds and likely to run the table on global gas imports.

But critical analysis does not appear to be in the Conference Board’s wheelhouse, as Rising Tide’s focus on future wage and tax benefits takes up most of the report. While COVID has created acute public sector challenges, Rising Tide appears to hope those challenges will make Canada’s central and British Columbia’s provincial government more amenable to the Conference Board’s weak arguments. The authors bank on those governments not knowing when to walk away, and instead call on them to risk sustained subsidies that may only yield stranded assets, depleted finances, and delayed retraining obligations.

Don’t bet on it.

Melissa Brown

Former Director, Energy Finance Studies, Asia, Melissa Brown, a former securities analyst at JP Morgan and Citigroup, has played a leading role in various Asian investment organizations focused on mainstream and sustainable investment strategies for public and private equity investors over the past 25 years.

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Norman Waite

Norman Waite is a former IEEFA energy finance analyst. Early in his IEEFA tenure Norman estimated insurance company AIA’s potential exposure to coal-related investments in late 2020. That report contributed to the insurer’s eventual divestment of over USD10B in coal-related assets in 2021. 

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