India has mostly been a non-factor to date in the correction of LNG markets in 2017 because of a lack of domestic natural gas infrastructure, but that should change in 2019 and 2020. Yesterday, we saw two good reminders on how India is just now starting to build out the domestic natural gas infrastructure to support India Prime Minister Modi’s target to get natural gas to 15% of its energy mix in 2030. Modi’s made a major speech highlighting the build out of its compressed natural gas (CNG) distribution centres for vehicles and local natural gas distribution pipelines. Bloomberg estimated that LNG regasification capacity additions of ~4.9 bf/d in 2019/2020, which is 1.3x current India LNG regasification capacity. If Modi is to hit the natural gas target to reach 15% of energy mix in 2030, this would add ~1.3 bcf/d of natural gas consumption per year. India may not be a China in terms of its LNG impact, but ~1.3 bcf/d of increased demand per year is equivalent to approx 2 Cheniere LNG phases, or ~75% of LNG Canada’s Phase 1 of 1.7 bcf/d. Its one more reason why the outlook for LNG demand looks good in the early 2020s.
We aren’t on Premier Notley’s special envoy consultation list to come up with solutions to narrow the heavy oil differentials, but, if we were, we would tell them that the first priority should be to not make the situation worse. And we would be strongly pushing that they act now to make sure the Liberals do not move on their announced desire to accelerate the phase out of the jacketed CPC-1232 tank cars. The jacketed CPC-1232 tank car is likely the majority of crude by rail tank cars in Canada and any elimination or earlier phase out of the existing CPC-1232 tank cars would directly reduce Cdn crude by rail capacity and volumes. This would lead to an increasing in heavy oil differentials. We don’t think it is an easy task, but it will be a lot easier for her to stop the Liberals from moving on this issue as opposed to trying to get it overturned after it has been implemented. Our concern is that if Alberta does not act now, they run the risk of a similar situation as Bill C69, where something gets passed that is a big negative to the oil sector. No one should forget that its not just Alberta that has elections in 2019, the next we shouldn’t forget that the Canada federal election has to be held by Oct 21, 2019.