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British Columbia keeps LNG hopes alive Government expects ‘remarkable’ year of announcements as major players ExxonMobil/Imperial, CNOOC and Woodfibre advance plans Gary Park For Petroleum News
There is no shortage of critics suggesting that British Columbia’s hoped-for LNG industry is in decline, but some of the outward appearances suggest otherwise.
Official word from the joint venture by ExxonMobil and Imperial Oil that they have entered the regulatory phase for their planned C$25 billion West Coast Canada LNG project has been joined by action on the Aurora LNG project operated by China’s CNOOC, while Woodfibre LNG has applied for an environmental assessment certificate.
Those developments coincided with a bullish statement from the province’s Deputy Premier Rich Coleman, who predicted that, after three years of government planning, the industry “will take flight in 2015 as leading proponents make final decisions to move forward with some of the largest capital projects in our history.”
Just in case the message didn’t get through, he declared he was “looking forward to a remarkable 2015 as we reinvest in a mature industry and turn a vast supply of natural gas into Canada’s next economic success story.”
Coleman, who holds the natural gas development portfolio, also noted there has been a sudden resurgence of interest in the resource in the government’s monthly auction of exploration rights.
“One of our largest land sales in history occurred near the end of 2014 with industry contributing over C$209 million for exploration rights alone.”
LNG site selected Then there was word in mid-December that Australia’s Woodside Petroleum had acquired Apache’s previously unwanted 50 percent of the Kitimat LNG project led by Chevron.
On the action front, CNOOC, through its Canadian unit Nexen, disclosed in a regulatory filing that it has selected almost 1,000 acres on Digby Island, only two miles from the Prince Rupert Airport, as its LNG terminal site. A public comment period is set for March.
The project carries a price tag of C$20 billion and would employ up to 5,000 construction workers at peak.
Canada’s National Energy Board has approved the liquefaction of 3.7 billion cubic feet of natural gas a day, allowing exports of up to 32 million metric tons a year over 25 years, with an in-service target of 2023 at 12 million metric tons a year, followed by another 20 million metric tons in 2028.
CNOOC owns 60 percent of Aurora, with the balance shared by Inpex and JGC Corp., both of Japan.
A final investment decision for Aurora is expected in 2017, the same year ExxonMobil expects to make a corporate sanctioning decision for WCC.
Woodfibre’s export terminal is planned for a pulp mill that was closed nine years ago at a site the company said in its application has had “more than a century of industrial use” along with extensive logging adjacent to the project area.
The project would create 650 construction jobs and 100 fulltime plant workers to export up to 2.1 million metric tons a year to Asia over 25 years.
The application said the terminal would be powered by electricity from government owned British Columbia Hydro, thus “reducing air quality concerns and generating fewer greenhouse gas emissions.”
A company spokesman said the project would contribute “good jobs, opportunities for local businesses and contractors, and that protects the environment, on land and water,” adding more than C$2.1 million a year to the local tax base, but newly elected Mayor Patricia Heintzman in the nearby town of Squamish said Woodfibre LNG has yet to earn a social license.
Downward price spiral While domestic issues pose a challenge for British Columba’s LNG projects an even greater concern stems from a downward spiral in Asian gas prices as Russian and Middle Eastern suppliers are battling for customers.
Argus, an energy price reporting agency, estimates new LNG projects are capable of delivering an additional 48 million metric tons a year into the Asia-Pacific region starting this year.
LNG for delivery in March is now selling at US$10 per million British thermal units, compared with as much as US$16 in 2013 and a Reuters survey forecasts that prices could fall by another 30 percent this year as Japan restarts more of its nuclear power facilities that were shutdown following the devastating 2011 earthquake.
The slump in crude prices is putting a squeeze on natural gas from two directions: Competition among power generators who can switch their fuel source to oil from gas and, more significantly, long-term natural gas contracts that are linked to oil.
But the state of crude prices will not affect Imperial’s strategy to build on the cost advantages of its long-term assets, a company spokesman told the Vancouver Sun. He noted that if a corporate decision is made to proceed with the WCC project, the facility would not come onstream until after 2020.
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