Down to the short list
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Gas trade publication rates Woodfibre as player with best chance of forging ahead
GARY PARK For Petroleum News
Amid the seemingly endless shuffling of Canada’s LNG deck to reach the launch point for even a single project, the best bet for a corporate sanctioning decision has narrowed down to Woodfibre LNG, a small-scale producer on the coast north of Vancouver.
Despite all of the community, First Nations and environmental opposition encountered by the privately owned venture it has emerged from a short list of proposals as the best bet to proceed.
World Gas Intelligence, a trade publication, said only four from the field of 20 proposals for the British Columbia coast now look feasible as the industry reels from a global supply glut and nose-diving prices for the commodity.
The analysis said that not even the “final four” may go ahead “until prices and demand pick up.”
The other three in the “most-likely-to-succeed-club” are Pacific NorthWest led by Petronas; LNG Canada operated by Royal Dutch Shell; and WCC LNG, co-owned by ExxonMobil and Imperial Oil.
The publication said the odds on Canada’s East Coast favor Pieridae Energy’s Goldboro LNG venture in Nova Scotia, where three other proposals are in the works along with one in New Brunswick, with Bear Head LNG gaining some traction by acquiring an additional 72 acres at its terminal site.
Bear Head is also working on deals to source gas feedstock from Atlantic Canada’s offshore, the Utica shale basins and TransCanada’s mainline from Western Canada.
Less likely Headed in the opposition direction in British Columbia are Kitimat LNG (Chevron and Australia’s Woodside Petroleum) and Prince Rupert LNG (now owned by Shell after it completed its acquisition of BG Group).
World Gas Intelligence candidly rated those two as being on “life support.”
Others in retreat include Triton LNG headed by AltaGas and Aurora LNG, a scheme by China’s CNOOC.
The article noted that the British Columbia government is “still clinging to hopes that a major LNG export project will go ahead,” with its greatest hopes pinned to Pacific NorthWest LNG, despite being stalled by the Canadian government’s “glacial decision-making process.”
What adds strength to that project is the investment of more than C$2 billion a year in the 2013-2015 period on establishing natural gas supplies in northeastern British Columbia.
World Gas Intelligence made a concession to the British Columbia government of Premier Christy Clark, noting that “to be fair, the (plight facing LNG proponents) is not peculiar to Canada, as cratering oil and gas prices have combined with a growing LNG supply glut to paralyze new liquefaction projects almost everywhere.”
Woodfibre breakthrough For Woodfibre, there was a breakthrough in late March when federal environmental approval was granted, representing a “milestone” on the way to a C$1.8 billion plant for exporting a modest 2.1 million metric tons a year of LNG to Asia.
Byng Giraud, said his company - which is privately held by Singapore-based RGE Pte. Ltd. - has now established a strong case for proceeding.
“People say, ‘We don’t trust their science,’” he told the Globe and Mail. “Well, we’ve gone to three different agencies. We’ve gone above and beyond. It’s three decisions.”
Even so, Woodfibre still needs a range of permits if it is make a final investment decision this year to become operational in 2020.
Giraud also said the company needs to lower its capital budget by negotiating better deals with contractors and suppliers, along with settling long-term contractors with buyers.
Eoin Finn, research director for the My Sea to Sky organization, said the federal approval means there are now few options available for stopping the project other than the “dismal” economics facing LNG.
But he said that pinning opposition on the LNG outlook leaves critics “helpless,” beyond staging protests and possibly taking legal action to protect fisheries.
West Vancouver Mayor Michael Smith said LNG tankers would travel through a vital recreation area for the growing population of Greater Vancouver.
“No one can guarantee our residents that there will not be a catastrophic incident either at the LNG terminal (which is a converted pulp mill) or at one of the tankers. Even though the risk might be small, it is not one that is worth taking.”
Passing straws Canada’s Environment Minister Catherine McKenna said the federal government is committed to ensuring that the energy sector remains a source of jobs, prosperity and opportunity amid a demand for sustainable practices.
“Natural resources are important to the Canadian economy,” she said. “There are a number of projects undergoing environment assessments under existing legislation (which is being revised) and it is not fair to any proponent to send them back to the starting point.”
Those clutching at any passing straws for LNG derive hope from evidence that a number of proponents are continuing to refine their applications.
WCC LNG has filed a request to extend its export permit to 40 years from 25 years covering annual shipments of 30 million metric tons.
ExxonMobil is taking advantage of government incentives to improve the project’s economics and said it has “entered into confidentiality agreements with several pipeline companies relating to services for the delivery of gas to the LNG terminal” at either Kitimat or Prince Rupert.
The state of the global LNG market was captured by Platts, a provider of energy data, which said spot prices in northeast Asia averaged US$4.46 per million British thermal units in March, compared with US$18.11 two years ago.
Michael Mott, chief financial officer of LNG Ltd., said Western Canadian producers continue to hunt for buyers despite the oversupplied market.
“At a macro level markets are oversupplied, but at a micro level there are niche players who want to monetize now,” he said.
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