A wide-ranging Asian consortium backing British Columbia’s Pacific NorthWest LNG consortium has become the first of 17 LNG proposals in the province to make a solid commitment to go ahead with its plans by investing C$12 billion to produce, process and ship Canadian natural gas to the owners’ home markets.
TransCanada also reported four additional agreements with First Nations, helping clear the way for a C$5 billion investment linking shale gas fields to the Pacific NorthWest liquefaction terminal on Lelu Island, south of Prince Rupert.
The decision to tie the final knots on Canada’s first LNG export venture came as the British Columbia Legislature was winding up its spring session, triggering a flush of excitement in a government that has pinned much of British Columbia’s economic future on returns from LNG.
Deputy Premier and Natural Gas Development Minister Rich Coleman described the announcement by project operator, Malaysia’s state-owned Petronas, as “a significant milestone for us.”
“Obviously, it means we can be competitive globally. This is great news for British Columbia,” he said.
The partners are Petronas 62 percent, China’s Sinopec 15 percent, Indian Oil Corp. 10 percent, JAPEX 10 percent and PetroleumBrunei 3 percent.
Coleman said that British Columbia’s vast gas resource, most of it stuck in the ground with nowhere to go, is “basically sold.”
He expressed confidence that the consortium’s remaining loose ends can be tied together, creating thousands of construction, service and gas development jobs, potentially giving Canada’s energy industry its greatest lift since the Alberta oil sands started on their growth path in the 1980s.
Pacific NorthWest could also provide Western Canadian gas producers with a market outlet to offset a crippling loss of export sales in the United States.
Coleman expects the British Columbia Legislature will reconvene in July to sign off on the project.
Federal approval needed
In addition, the proponents need regulatory approval from the Canadian government covering environmental issues, notably measures to mitigate threats to a salmon spawning area - a decision that may not be made until after a federal election expected in October.
As well, there are delicate negotiations involving the provincial government and the consortium to conduct with the Lax Kw’alaams First Nation which rejected an offer of C$1.14 billion in benefits over 40 years to protect a salmon habitat adjacent to Lelu Island.
“We will work with them to solve their issues,” Coleman pledged. “There is some additional design work and some research being done to accommodate those concerns ... you will see that the Lax Kw’alaams will come together with other First Nations that have already endorsed the project.”
He said that dealing with the loose ends could see construction start in the final quarter, with the first LNG shipments occurring in 2019, opening the way for a total investment in the project of C$36 billion.
Canada’s Natural Resources Minister Greg Rickford said LNG has the “potential to diversify our energy markets and product offering, creating jobs and economic growth for Canadians.”
John Winter, chief executive officer of the British Columbia Chamber of Commerce, said the Pacific NorthWest breakthrough is a “truly historic announcement ... once-in-a-generation stuff. It is rare that we witness a brand new industry coming to British Columbia.”
AltaGas next in line
Next in line is a group led by Calgary-based AltaGas, whose Chief Executive Officer David Cornhill said the Douglas Channel project at Kitimat may even beat Pacific NorthWest to market if it makes a final investment decision this year.
The much smaller venture, with plans for first-phase shipments of 550,000 metric tons a year - compared with Pacific NorthWest’s initial goal of 12 million metric tons - could start deliveries by late 2018.
“There is nothing we see at this point that will stop us,” he said. “There are some tight deadlines, so it’s not a walk in the park, but clearly we think it’s achievable.”
The other leading edge contender is the LNG Canada project, led by Shell Canada, with Korea Gas, Mitsubishi and PetroChina as stakeholders, which is working towards a final investment decision in 2016, targeting eventual shipments of 24 million metric tons a year.
Bruce Ralston, natural gas spokesman for British Columbia’s opposition New Democratic Party, said his party is hopeful there will be a final signing off by Petronas, but pointed an accusatory finger at Premier Christy Clark for making such sweeping promises in the 2013 election, including the use of LNG revenues to build a C$100 billion Prosperity Fund.
“There are no shovels in the ground yet,” he said, while insisting that First Nations must be involved as “true partners” in the industry.
