Attention in British Columbia’s endlessly tangled LNG web has shifted to a consortium led by Shell that has cleared a crucial regulatory hurdle.
Natural Gas Development Minister Rich Coleman and Environment Minister Mary Polak attached 24 conditions in issuing an environmental assessment certificate for LNG Canada.
“Many of the legally binding conditions were informed by consultation with aboriginal groups and include requirements for continued engagement of (those groups) and programs to support aboriginal employment,” said a government release.
The approval noted that construction of an export terminal at Kitimat will also require federal, provincial and local government permits.
LNG Canada said the partnership “must ensure the project is economically viable and meet several milestones related to gas supply, engineering and cost estimates, supply of labor and regulatory approval prior to making a final investment decision.”
Canada’s Environment Minister Leona Aglukkaq said in a statement that the project underwent a thorough science-based environmental review in a joint federal-provincial process.
50% Asian ownership
LNG Canada Chief Executive Officer Andy Caditz said the joint venture, which includes 50 percent Asian ownership shared by PetroChina (20 percent) with Mitsubishi and Korea Gas each holding 15 percent and, has now cleared a “critical milestone on our path” to corporate sanctioning.
Ellis Ross, chief councillor of the Haisla First Nation, said his group supports the venture, while Kitimat Mayor Phil Germuth expressed optimism about the chances of economic benefits in his region.
LNG Canada plans to build a terminal to liquefy gas and export an initial 12 million metric tons a year, with the option to double those shipments.
The site was formerly occupied by a methanol plant that was closed in 2006 by Methanex Corp., while the planned dock for LNG tankers formerly belonged to a Eurocan pulp and paper mill that shut down in 2010.
In its desire to recover from those setbacks, Kitimat has seen construction start in 2012 on Rio Tinto Alcan’s US$4.8 billion modernization of its aluminum smelter.
Question on Kitimat
But there is a looming question over how much Kitimat is prepared to and capable of handling in the LNG sector.
In addition to LNG Canada (whose partners include Korea Gas, Mitsubishi and PetroChina), two other ventures hope to operate out of the Kitimat area.
They are the Chevron-led KM LNG Operating General Partnership, with Australia’s Woodside Petroleum as a joint equity partner.
KM has all of the significant regulatory approvals from the Canadian and British Columbia governments for its plans to start exporting 11 million metric tons a year, and the BC LNG Export Cooperative, designed to export 900,000 metric tons a year, has been forced to apply for a replacement export license because of proceedings under Canada’s bankruptcy legislation affecting the previous owner. That application was submitted earlier in June. Because of its small size the project is not required to obtain federal and provincial environmental certificates.
The Haisla First Nations has shown some of the strongest aboriginal support for LNG facilities to operate on their traditional lands, although there is still pressure from the Haisla leadership on the proponents to pay greater attention to reducing environmental impacts.
Former Haisla chief councillor Gerald Amos, while conceding that Kitimat is an “industrial town,” said that does not mean the path for LNG operations is clear.
The Haisla also have their own tentative plans for Cedar LNG, using properties the First Nation has assembled on the Douglas Channel out of Kitimat.
Work is also proceeding on an LNG barge project near Kitimat that is planned by AltaGas, Idemitsu Kosan, Exmar and EDF Trading.
Shell acquisition of BG
The most dramatic change to the shape of the LNG Canada plans has been the biggest merger in the energy sector in more than a decade with Shell’s US$70 billion acquisition of BG Group, which has just received a green light from the United States Federal Trade Commission.
If the deal is concluded as hoped for by early 2016 that will probably put paid to the British company’s plans for its Prince Rupert LNG Exports Ltd., which was based on initial exports of 14 million metric tons a year.
Although that transaction could shelve one of the major proposals, the combined entity could intensify pressure on Kitimat.
A spokeswoman for LNG Canada said the Shell-led consortium is optimistic it can work cooperatively and successfully with aboriginal communities.
“There will be opportunities for the Haisla and other First Nations to be a part of the construction and at some point the long-term operations,” she said.
Anything less will likely be viewed as unacceptable by the First Nations, but how far they are prepared to go in endorsing projects is now the most crucial test in the Kitimat area.
