New regulatory landscapes
While Western Canada and the US have well-developed regulatory systems, LNG export projects are a new phenomenon in Canada. As a result, there can be complex layers of local, regional and federal government bureaucracy regarding the obtaining of permit. East Africa (Mozambique and Tanzania), meanwhile, is building an LNG industry and its legal and institutional framework -- from the ground up.
A new spectrum of stakeholders
As well as government, the new LNG locations feature vocal non-government organizations (NGOs), labor unions, local communities, indigenous people (First Nations in Canada) and domestic business lobbies. The link to shale gas exposes North American projects in particular to scrutiny from environmental groups. US projects also have to win and retain support in order to receive approval for non-Free Trade Agreement (FTA) exports and pass the Federal Energy Regulatory Commission (FERC) regulatory process. All of these stakeholders can be supporters or opponents of a project, depending on how developers engage them.
Human resources challenges
As the Canadian oil sands and Australian LNG booms have shown, skilled labor can quickly become a constraint, even in developed economies. Proactive strategic engagement with organized labor, educational establishments, and government and business communities can prepare in advance to meet human resource needs at reasonable costs. East Africa, however, faces the challenge of building a corps of capable local talent – requiring a huge program of new university capacity and professional training.
Unusual infrastructure needs
As in Australia, the British Columbia projects feature a number of near-simultaneous developments in the same area. East Africa, meanwhile, is hosting megaprojects in a region of very limited existing infrastructure. In both cases, companies have to determine how to develop the supporting infrastructure including the required ports, air strips, pipelines, power, housing and other systems. This raises questions of who will build and finance these systems, how projects should cooperate and which partners will deliver them. US projects have an advantage in converting existing import terminals because of considerable existing infrastructure and the fact that most of it is being built in traditional oil and gas heartlands.
Non-traditional commercial models
Unlike most traditional LNG projects, the US Gulf Coast will secure gas from the grid, rather than from dedicated fields, and its price is expected to be linked to the Henry Hub Natural Gas Index rather than to oil. Dry gas feedstock presents quality challenges for Asian customers. Non-traditional buyers are emerging, such as the Middle East and Caribbean, who may have special requirements – different seasonality or small-volume contracts. North American projects are also being seen in a new geopolitical light as political developments make some traditional gas exporters seem less reliable. Meanwhile, traditional Asian LNG buyers continue to favor security of supply and certainty of timing, but are starting to demand more competitive pricing.
For further details, please read the full report (PDF 1.6 MB).