Yet another little-known proponent has squeezed its way into British Columbia’s jam-packed LNG field, with plans to build a floating liquefaction facility on Vancouver Island, 25 miles north of the provincial capital of Victoria.
Vancouver-based Steelhead LNG Corp. has teamed up with the Malahat First Nation, following a deal announced earlier this year by Steelhead to partner with Huu-ay-aht First Nation to build a terminal, also on Vancouver Island.
Steelhead, which hopes to file an LNG export license for its latest scheme with Canada’s National Energy Board by late October, plans capacity of 6 million metric tons a year of LNG.
It said the facility would generate revenue for at least 30 years for the 300-member Malahat Nation and create 200 full-time jobs when it is fully operational.
But Steelhead provided no details on where it will source its natural gas for the project, how it will deliver the gas to Vancouver Island and where it hopes to market the LNG.
CEO says company ‘on the map’
But Steelhead Chief Executive Officer Nigel Kuzemko declared his company is “on the map and we’ll be here for a while.”
A British-born geophysicist who moved to Vancouver a year ago, Kuzemko said more details will be released in coming months, including the projected cost, leading to a final investment decision within two years.
Malahat First Nation Chief Executive Officer Lawrence Lewis said his area is already enjoying some of the economic benefits of the mutual agreement, although he doubted construction would start before 2020.
“This is another step forward and another indication that the (Malahat nation) is open for business,” Lewis said.
However, the announcement startled many of the Malahat residents and the local government.
Lori Iannidinardo, a director of the local regional district, said she first heard of the project through an online disclosure only two days before the plan was made official.
“I’m caught off guard and absolutely surprised,” she said, predicting there will likely be outrage and protest from her community.
Adam Olsen, interim leader of the British Columbia Green Party and a member of the Tsartlip First Nation, which occupies land across an inlet from the terminal site, said the fact that the venture has been in the planning stage for 13 months without any public discussion taking place “is a problem.”
“There are four First Nations that need to be consulted and as a member of one of this I’m staunchly against this idea,” he said, while adding he does not believe the project will ever get to the starting line.
Steelhead has a former British Columbia Attorney General Geoff Plant on its board and has signed up Calgary-based private equity firm Kern Partners as its lead investor.
None have corporate sanctioning
So far none of the 14 LNG projects still in various planning stages has received final corporate sanctioning, but upstream activity in the province shows continued confidence in the outlook for LNG.
While drilling activity in northeastern British Columbia’s Peace River gas region was down 23 percent in the first half of 2015 from a year earlier, companies are investing hundreds of millions of dollars in pipelines, compressor stations and gas plants, based on a gamble that commercial ventures will go ahead.
Notwithstanding the decline in drilling, Mark Salkeld, chief executive officer of the Petroleum Services Association of Canada, said that in “this day, and all things considered, it’s pretty impressive.”
Drilling has started on 311 new wells for the first seven months of this year compared with 392 a year ago, the British Columbia Oil & Gas Commission reported.
In July, the drilling industry said 27 of 83 available rigs were at work, representing a utilization rate of 33 percent, compared with 48 out of 77, or a 62 percent rate, in the same month of 2014.
For all of Canada 24 percent of available drilling rigs operating, reflecting the extent to which Alberta has underperformed, but northeastern British Columbia has exceeded PSAC’s forecast, Salkeld said.
PSAC now expects British Columbia will drill 559 wells this year, up four from its original forecast, based on a “reasonable amount of confidence that B.C. LNG initiatives will go ahead,” he said.
Progress Energy plans C$2B spend
Progress Energy Canada, wholly owned by Petronas and the biggest hope to supply gas for the Malaysian’s company’s Pacific NorthWest LNG project, is developing plans to spend C$2 billion on drilling and associated infrastructure, including 200 wells this year by 18 to 20 rigs, the company said.
The objective for Progress is to produce 2 billion cubic feet per day by 2019-20, the tentative commissioning target to provide feedstock for Pacific NorthWest.
Of the other leading drillers, Encana has completed its latest set of wells in the Montney shale formation west of Dawson Creek and its hydraulic fracturing operations, but does not expect to drill any more wells this year.
Otherwise, the company is continuing work on two gas compressor stations and the expansion of a C$100 million water treatment hub.
In the first four months of 2015, wellhead production in British Columbia totaled 16.8 billion cubic meters (before field losses to flaring and venting), up 8 percent from the same period of 2014, with British Columbia consumption accounting for 2.83 billion cubic meters, with most of the destined for the United States.
The provincial government granted C$115 million in deductions from royalty payments for companies building 14 industry infrastructure projects, roads or pipelines.
