No one is suggesting that Calgary is about to give up its role as the center of Canada’s petroleum universe, but Vancouver is steadily emerging as more than just a branch plant.
If all of the pieces now on the table fall into place, Vancouver could become — and may already be — the headquarters of Canada’s nascent LNG industry.
Offices have already been opened on the Pacific Coast by producers and LNG proponents Chevron, Royal Dutch Shell, Petronas and BG Group and pipeline giants TransCanada, Kinder Morgan and Enbridge.
The latest step forward occurred Jan. 9 when Progress Energy Canada (the entity that emerged from December’s takeover of Progress Energy by Malaysia’s state-owned Petronas) awarded TransCanada the rights to build, own and operate the Prince Rupert Gas Transmission pipeline to deliver gas to its proposed Pacific Northwest LNG terminal near Prince Rupert.
That came only six months after TransCanada landed a similar deal with the Shell-operated LNG Canada partnership that has Korea Gas, Mitsubishi and PetroChina each holding 20 percent. It has been selected to build, own and operate the Coastal GasLink pipeline from the Montney region in northeast British Columbia to deliver about 4 billion cubic feet per day to a terminal at Kitimat.
C$10B in direct investment
The two deals mean TransCanada has a lock on more than C$10 billion of direct pipeline investment, including as much as C$1.5 billion to expand its Nova gas-gathering network in Western Canada.
TransCanada Chief Executive Officer Russ Girling said the C$5 billion, 470-mile Prince Rupert line, with initial capacity of 2 bcf per day, expandable to 3.6 bcf per day, along with Coastal GasLink, demonstrates “the confidence that LNG sponsors continue to place in our ability to design, build and safely operate pipeline systems.”
He described TransCanada’s LNG involvement as a “sweet spot of our backyard in terms of an opportunity to grow earnings beyond the 2015 timeframe.”
Girling said the Prince Rupert project “will allow British Columbians and all Canadians to continue to benefit from the responsible development of the growing supplies of valuable energy resources” in the Western Canada Sedimentary Basin.
More good news for BC
British Columbia Energy Minister Rich Coleman told Petroleum News that the Progress announcement is “more good news for British Columbia’s emerging LNG potential; another step forward for our goal of seeing an LNG export industry in operation in the near future.”
A spokesman for the energy ministry said the province hopes the “multiple projects proposed at this time” will translate into three operating LNG facilities in British Columbia by 2020.
To that end, he said the recently announced BC Jobs Plan, which targets more than C$1 trillion of economic activity in British Columbia over the next 30 years, includes a commitment by the B.C. and Canadian governments to develop a “single, effective environmental assessment process which maintaining the highest standards.”
That objective has already seen TransCanada open discussions with the British Columbia and Canadian governments, along with labor unions, “to ensure there is a process in place to train labor forces” for the three-year construction period expected for the Prince Rupert pipeline, Girling said.
Streamlining environmental review
He said TransCanada is also in contact with British Columbia and federal regulators to “work out a streamlined way to ensure that there is a comprehensive, yet timely environmental review of all aspects of our projects.”
Girling said some conversations have been held and TransCanada has been “very pleased by the cooperation that has existed.”
In addition, he said TransCanada, drawing on its experience dealing with about 150 communities affect by the company’s existing facilities, is moving quickly to approach all stakeholders, such as First Nations and landowners, and has had positive feedback on Coastal GasLink.
“We want to understand what impacts we will have and look for mutually beneficial solutions to meet those concerns,” he said.
Without referring to the harsh lessons TransCanada has learned in its battle to win approval for its Keystone XL pipeline in the United States, Girling said his company will “make sure that we listen (to concerns raised over LNG pipelines) before we start drawing lines on maps.”
The challenges facing Coastal GasLink are evident from the number of First Nations in the Prince Rupert area laying claim to the area.
However, Girling said TransCanada does not favor discussing equity positions with First Nations.
“We have found ways to meet communities’ needs that are less complicated and more beneficial to the communities,” he said.
Barry Munro, Canadian energy industry leader at Ernst & Young, said the Pacific Northwest deal demonstrates the “continuing maturation of the LNG export opportunity out of Canada.”
He said that although a lot of attention has been paid to oil pipelines proposed for exporting crude bitumen to Asia, the natural gas pipelines tied to LNG are “moving ahead too.”
Jockeying for position
Peter Tertzakian, chief energy economist at ARC Financial, told the Globe and Mail that TransCanada’s role points to a shift in how plans to export LNG from the British Columbia coast are playing out.
“To this point, a lot of jockeying has been taking place on the coast” relating to who will build facilities and where they will be located.
“My view is that that phase is over,” he said. “Now we’re shifting to how we get the gas to the coast, how fields are to be developed, along what routes and how rights of way and environmental issues will be dealt with as well as community stakeholder and First Nations issues,” Tertzakian said.
Although TransCanada has taken a tight grip on the rights to deliver gas to LNG terminals, it doesn’t have the field to itself.
United Kingdom-based BG Group is wasting no time staking out its LNG claim, having teamed up with Houston-based Spectra Energy, which was once the sole major energy company with an office in Vancouver.
Spectra has been chosen to build a C$6 billion-C$8 billion pipeline to the Pacific Coast and BG is working on plans to export 13 million-14 million metric tons per year, compared with the 12 million metric tons tentatively proposed by both LNG Canada and Pacific Northwest.
Also fueling the competition is Chevron which has taken over as operator of the Kitimat LNG project, which holds a permit to export about 10 million metric tons a year and is now pulling out the stops to find Asian buyers.
—Gary Park
