British Columbia’s Pacific NorthWest LNG project has emerged intact from the regulatory phase, including two exhaustive environmental reviews, with Canadian government approval that imposes 190 conditions, the toughest of which are designed to reduce environmental conditions.
In making the announcement Sept. 27 in Vancouver, three federal cabinet ministers - Catherine McKenna (environment), Jim Carr (natural resources) and Dominic LeBlanc (fisheries and oceans) - made it clear the decision did not come with any guarantees from the lead partner Petronas that the project will ever be built.
The best guess is that a fully operating project is at least five years away.
For now, though, control has been transferred to Petronas, which has a 62 percent stake in the liquefaction facility near Prince Rupert and the natural gas reserves in northeastern British Columbia. The other participants are China’s Sinopec with 15 percent; Japan Petroleum Exploration and Indian Oil Corp with 10 percent each; and PetroleumBrunei 3 percent.
The government approval covers the C$11.4 billion processing and export facility which will handle 3.2 billion cubic feet per day of natural gas and export up to 19.2 million metric tons of LNG a year.
Carbon dioxide an issue
A federal environmental report released in February estimated the LNG facility would release about 5.3 million metric tons a year of carbon dioxide, adding 8.5 percent to British Columbia’s total emissions, while the upstream segment, including natural gas exploration and transportation, would add another 6.5 million to 8.7 million metric tons.
But, in setting a new environmental standard for resource development, the Canadian government will require the proponents to meet a cap on greenhouse gas emissions that would cut them by nearly 20 percent, setting a target of 4.3 million metric tons for the LNG plant.
It is not yet clear whether that would translate into a 20 percent reduction in output.
“The only way to get resources to market in the 21st century is if they can be done in a responsible and sustainable manner,” McKenna told reporters. “This decision reflects that objective.”
Pacific NorthWest’s President Adnan Zainai Abidin said in a statement that the consortium was pleased the government had issued its environmental decision.
Now the partnership will “conduct a total project review over the coming months prior to announcing the next steps for the project,” he said, without indicating when a final investment decision is likely.
Project challenges
The overriding challenge is to determine the economics, given the dramatic shift that has occurred in the last three years.
In 2014 the spread between North American and Asian natural gas prices was as high as US$16 per million British thermal units; that spread has now shrunk to between $6 and $8, forcing other Canadian proponents such as the Shell-operated Kitimat LNG Canada project at Kitimat to shelve its plans indefinitely.
Ian Gillies, an analyst with FirstEnergy Capital, said final approval from the Pacific NorthWest consortium is “far from certain.”
Adding to that uncertainty is the certain prospect of more delays triggered by environmentalists and First Nations.
Clean Energy Canada Executive Director Merran Smith said the project was “not in the best interests of Canadians.”
Even with the reduced emissions cap, it would still be “one of the single biggest sources of carbon pollution” in Canada, she said.
George Hoberg, professor of environmental and natural resource policy at the University of British Columbia’s Institute for Global Issues, said the government announcement is a “major step backward” for Prime Minister Justin Trudeau’s administration, which has committed to lowering emissions by 30 percent by 2030.
“B.C. has blown through its 2020 emission-reduction target and abandoned all pretence of reducing emissions before 2030,” he said.
The Skeena Corridor Nations, with representatives from six aboriginal communities, said the green light will “only lead to protracted litigation, which benefits no one,” while the Sierra Club of B.C. said Canada’s second largest salmon run “may have had its death warrant signed, through a reckless disregard” for the dangers posed by the Pacific NorthWest liquefaction plant.
Development values
On the other side, Val Litwin, president of the B.C. Chamber of Commerce, said Pacific NorthWest - which carries an estimated price tag of C$36 billion for gas development, transportation and the LNG facility - would be the largest private sector development in Canadian history.
It is a “monumental step toward securing not only the future of B.C., but could also mean a much-needed boost for the Canadian economy.”
B.C. Premier Christy Clark, whose chances of re-election in May 2017 depend heavily on moving at least one LNG project towards completion, said Pacific NorthWest represents an “unprecedented opportunity to create thousands of jobs and new economic prospects for First Nations and communities throughout our province.”
She boldly forecast that the price of natural gas will “go up any day” based on a strong appetite for the commodity in China and Japan, who need an alternative to coal-fired power plants.
