LNG decision in focus

BC Provincial cabinet minister hopes for Pacific NorthWest LNG sanctioning by mid-2017, based on discussions with Petronas leaders

GARY PARK

For Petroleum News

Despite the many loose ends yet to be nailed down, a final investment decision is still possible by mid-2017 on British Columbia’s Pacific NorthWest LNG project, said Rich Coleman, the cabinet minister responsible for LNG.

He bases that optimism on recent discussions with management at Malaysian state-owned Petronas, operator of the C$36 billion venture, along with his belief that markets in China and Japan are willing to buy LNG from British Columbia.

Coleman said that once estimates of project costs and returns to partners have been resolved, Petronas will be in a position to see if the sales contracts are viable.

Also among the unfinished business is a partnership review of the 190 conditions attached to Pacific NorthWest by the Canadian government, he said.

Coleman told the Globe and Mail that it was clear during his latest visit to Malaysia in October that Petronas “wants to get to ‘yes’ on this thing, but it still has some due diligence to do.”

He said several more meetings are expected by mid-January on the project’s design and tendering process.

Spencer Sproule, a senior official with Pacific NorthWest, said the consortium is continuing to work with affected First Nations, stakeholders and regulators to “manage any potential impacts through mitigation measures and design optimization.”

On that front a Bloomberg News report hinted at a breakthrough, citing an unnamed source who said Petronas is adjusting plans for a liquefaction plant and tanker terminal on Lelu Island, near Prince Rupert, involving the transfer of the docking facility to nearby Ridley Island.

Sproule said Pacific NorthWest is “conducting a total project review over the coming months,” without disclosing what modifications are under review.

Aboriginal groups and environmentalists have strongly objected to the terminal location because of the potential impact on a shallow, eel-grass covered embankment that is a breeding ground for salmon and a place where juvenile salmon acclimate between fresh and salt water.

Gitanyow hereditary Chief Glen Williams said his community always wanted the terminal moved and is encouraged that Petronas is open to changes.

The Canadian government’s Environmental Assessment Agency said it has yet to receive any formal proposal, but is open to determining the “appropriate next steps.”

Ridley Island was formerly held by Canpotex, which relinquished its lease for a fertilizer export terminal in early 2016.

Separately, work is proceeding at a cautious pace on the Royal Dutch Shell-led LNG Canada proposal, with some 100 employees - about half the payroll when Shell decided five months ago to delay progress.

Although no revised timetable has been issued, LNG Canada Chief Executive Officer Andy Calitz said the remaining team is “working flat out but at a sustainable holding cost.”

He told the Globe and Mail that “there is space in the market in the mid-2020s for LNG from Canada,” meaning there is ample room to start and complete construction by 2025.

Another glimmer of hope amid a largely gloomy outlook for British Columbia LNG comes from high-flying natural gas player Seven Generations Energy.

The company President Marty Proctor said Seven Generations hopes to take advantage of opportunities it believes will surface in the next decade for midstream and downstream projects.

But, despite securing a minority stake three months ago in Steelhead LNG, which plans two LNG export projects on Vancouver Island, Seven Generations is only interested in committing gas volumes to operations such as gas-fired electric generation plants, liquefied petroleum gas export facilities or pipelines, but not making a direct investment in those operations, said company Senior Vice President Tim Stauft.

He said that although Canada’s gas production is forecast to drop to 14.8 billion cubic feet per day by 2020 from 15.4 bcf per day last year, largely because of competition from U.S. shale production in Eastern Canada, new pipeline capacity may be needed to the British Columbia coast.

However, Proctor said Seven Generations has contracted for capacity on TransCanada’s existing delivery systems and proposed gas lines to the Pacific Coast to connect with LNG projects.