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Piecing together a project; BC Assembly recalled for LNG project
The British Columbia government is taking the rare step of calling a mid-summer legislative session to pass a key bill that will set the stage for final agreement with the Petronas-led Pacific NorthWest LNG project.
At the same time, Petronas, with a 62 percent stake, and its partners (China’s Sinopec and Huadian Corp., India’s Indian Oil Corp., Japan Petroleum Exploration and state-owned Petroleum Brunei) have indicated they hope a new pact with First Nations will deal with concerns about the planned export terminals impact on salmon habitat.
Finance Minister Mike de Jong said the recall of the legislature for July 13 will debate legislation on a development agreement signed in May by the provincial government and the Asian consortium.
“The intention is to ensure that there is a proper statutory authority to sign this agreement, to give effect to this agreement with Pacific NorthWest and subsequent agreements that are similarly designed,” he said.
De Jong noted that Pacific NorthWest has given its conditional approval to the project provided it receives ratification in the legislature and a federal environmental certificate.
The government said it will keep working with First Nations and the proponent to “achieve the highest environmental standards, including the protection and enhancement of the fish habitat.”
John Horgan, leader of the opposition New Democratic Party in the legislature, said the summer session is a deliberate move by the government to debate an important issue when the public is on holiday.
“They are bringing forward a secret deal with a foreign company in July because they don’t want people to pay attention to what they are doing,” he said.
More work with First Nations Pacific NorthWest sent a recent letter to the Canadian Environmental Assessment Agency promising to conduct further work aimed at “evaluating and assessing,” in collaboration with governments and five Tsimshian First Nations, the impacts on Skeena River salmon populations.
One of those nations, the Lax Kw’alaams, refused in May to give the consent of its members to Pacific NorthWest’s C$1.15 billion cash offer over 40 years.
The Lax Kw’alaams, which claims title to the land earmarked for the terminal, said it will take legal action unless its environmental priorities are met.
“One of the key risks is potential for delay,” said Tom Isaac, a partner in Osler, Hoskin & Harcourt, who leads the law firm’s aboriginal law group, but has no involvement in the project. “If litigation were initiated that could take some time to winds its way through the courts.”
Two other communities, the Metlakalta and Kitselas, signed impact-benefit pacts with the joint venture last December, while two others, the Kitsumkalum and Gitxaala, have yet to announce their positions.
The legislated timeline for the CEAA work has been stalled twice, indicating it might take until October for the agency to issue its final report.
Estimate C$36 billion Pacific NorthWest estimates it will spend C$36 billion to start planned LNG exports to Asia in 2019, including C$11.4 billion for an export terminal at Lelu Island near Prince Rupert and C$6.7 billion for two pipelines from gas fields in British Columbia and Alberta.
The drawn out issues facing British Columbia’s LNG sector are prompting some global analysts to warn that LNG buyers will be oversupplied until at least 2020, with 40 percent of respondents to a recent Bloomberg Intelligence survey saying the glut might last until 2025, while the price of LNG imported into Japan dropped to US$7.50 per million British thermal units in April.
In the midst of the political maneuvering, there is talk that Petronas is on the verge of adding more partners to the consortium to reduce its own holdings from 62 percent.
On offer could be the partnership’s Montney gas assets in northeastern British Columbia which include proved plus probable reserves of more than 20 trillion cubic feet, which Petronas acquired three years ago in a C$6 billion takeover of Progress Energy Resources.
In late 2013 it built on the portfolio through deals with Talisman Energy for C$1.5 billion and Enerplus for C$130 million.
Petronas has indicated it is ready to unload 12 percent to spread the overall costs, which cover an initial C$12 billion.
Petronas Chief Executive Officer Shamsul Azhar Abbas said recently that making a final investment as soon as possible is “vital in light of the current intense market environment and for Pacific NorthWest LNG not to lose out on long-term contracts to competitive United States LNG projects.”
- Gary Park
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