|
B.C. raises doubts on LNG goals; Ziff: 5 plants by 2021 unrealistic
The British Columbia government is putting considerable effort into convincing itself and its residents that five of 10 possible LNG export projects will be built and operating in the province by 2021, creating 60,000 construction jobs and eventually positions for 75,000 permanent skilled workers.
Others are delivering a more subdued message, including Ed Kallio, director of gas consulting with Ziff Energy Group, who said completion of five plants within eight years is unrealistic.
“That’s a lot of people, that’s a lot of rigs and that’s a lot of steel pipe plants,” he said.
British Columbia’s newly formed Ministry of Natural Gas Development said the goal of five plants is based on an analysis done by independent consultants, adding that the National Energy Board has already issued three LNG export permits to proponents, including the small Douglas Channel project led by Golar LNG and LNG Partners, Chevron’s Kitimat LNG and Shell Canada’s LNG Canada.
Another four proposals — the Petronas-led Pacific NorthWest LNG; a Prince Rupert project operated by BG Group; the WCC LNG venture by ExxonMobil and Imperial Oil; and the early stage Woodfibre LNG, which plans to export from an old pulp mill near Vancouver — have filed for export permits.
Jobs estimate large Jobs Minister Shirley Bond said the estimate of potential employment issued by the government-appointed Natural Gas Workforce Strategy Committee is “not surprising to us, though they are very large,” adding the objective now is to ensure that British Columbians have the first chance to secure the work.
Geoff Stevens, chairman of the committee, said the job-creation numbers are consistent with the experience that Australia has had with construction of its LNG infrastructure.
He said the lesson from Australia is that “the further you can get ahead of the curve, the better off you are” in terms of developing a workforce.
The committee report also notes that last year British Columbia’s natural gas sector employed 13,235 people, mostly in services to the sector, and those numbers are expected to swell to 61,700 to drill for enough gas to meet the LNG-production capacity of the five plants, along with the province’s domestic and export needs for gas.
But Tom Sigurdson, executive director of the British Columbia and Yukon Construction and Building Trades Council, said that if five projects do go ahead they will pose a challenge for a province that has seen its skills training programs decline over the past 10 years.
“We will certainly not be able to put that many people on to the LNG projects in the time frame (the government) suggests,” he said.
Not a slam dunk From the sidelines, there is a growing chorus warning that given the many global LNG producers chasing a handful of buyers, the prospect of matching British Columbia’s goal is far from a slam dunk.
Rick George, former chief executive officer of Suncor Energy and now chairman of Penn West Petroleum, told a Calgary conference in July that two LNG projects are needed to establish Canada as a serious player in the LNG industry and to trigger the estimated C$100 billion of capital investment needed to find and produce enough gas for the multi-decade life of liquefaction plants.
He said the emphasis for now must be on securing contracts and buyers — not an easy job given the number of competing projects.
George said there are only three or four major potential markets for British Columbia LNG, led by China, Japan and India.
On the seller side, there are multiple producers exporting or hoping to export LNG, including Canada, the United States, the Middle East, Australia, Russia and eastern Africa.
Timing an issue “Timing is of the essence,” he said. “If we delay too long we may miss our opportunity,” George said, citing the specter of the Mackenzie Gas Project, which got so bogged down in regulatory delay that it was overtaken by the emergence of shale gas.
Russ Girling, chief executive officer of TransCanada, told analysts on July 26 that the Petronas and Shell projects are well advanced in meeting what he identified as the four key initial elements for a project: Support from the marketplace; the ability to produce gas; the technical expertise; and the “financial ability to pull it off.”
But the underlying edginess is evident in reports that even Malaysia’s Petronas hopes to sell a 50 percent stake in its C$20 billion project and is said to be discussing the sale of a 10 percent share to China’s Sinopec.
One source close to Petronas’ commercial strategy told Reuters the company is taking an aggressive approach to sharing its risks by helping raise the finance it needs and giving partners preferential access to Canadian LNG supplies.
Speculation has Petronas in advanced discussions with state-owned Indian Oil for 10 percent, adding to the 10 percent it sold to Japan Petroleum Exploration CO. in March for an estimated C$1 billion.
—Gary Park
| 