Providing coverage of Alaska and northern Canada's oil and gas industry
May 2016

Vol 21, No. 20 Week of May 15, 2016

British Columbia’s LNG teeter-totter

Petronas holds out hope of Pacific NorthWest FID this year; Shell juggles LNG Canada with two proposals for United States


For Petroleum News

In British Columbia’s LNG major league, it’s a case of one franchise hoping for survival and one loosening its grip.

The Pacific NorthWest project led by Malaysia’s Petronas is counting on final regulatory approval this fall leading to corporate sanctioning after more than three years of being subjected to review.

But Royal Dutch Shell doubts its LNG Canada proposal will make a final investment decision this year as the supermajor gives priority to two other LNG projects in the United States as well as a chemical plant in Pennsylvania.

For Pacific NorthWest, the finish line is in sight as the proponent submits its plans to build infrastructure at the tanker terminal and liquefaction plant site near Prince Rupert.

Federal Environment Minister Catherine McKenna said that if the Canadian Environmental Assessment Agency issues a go-ahead for the project she will ask the federal cabinet to start its designated 90 days of discussions on whether to approve the C$11.4 terminal construction.

Science answers

Pacific NorthWest director Michael Cuthbert told the Globe and Mail the consortium is confident it has final stages of dealing with information requests.

”Let science answer the questions,” he said. “We’ve gone through a rigorous assessment process.”

If the cabinet gives the green light, Pacific NorthWest can potentially make its final investment decision in September along with its partners from China, Japan, India and Brunei.

In a recent survey of 1,000 British Columbians commissioned by Pacific NorthWest, 63 percent supported the project, 20 percent opposed and 17 percent were neutral.

But environmental groups and some First Nations continue to raise objections to the dangers the project will pose to salmon habitat.

GHG impact an issue

The Alberta-based think-tank Pembina Institute said cabinet will also have to consider the impact of greenhouse gas emissions.

Pembina associate director Matt Horne did not buy the argument that LNG will replace Asia’s use of coal and diesel which generates more carbon.

He said the world needs to also produce less natural gas to lower pollution levels, noting that Pacific NorthWest is estimated to generate 4.9 million metric tons a year of equivalent carbon dioxide, undermining the British Columbia government’s target for allowable GHG emissions in the province.

View from Shell

Shell financial officer Simon Henry told a conference call that it is “unlikely more than two and maybe only one” of his company’s LNG ventures will be under construction by 2020 - British Columbia’s goal for starting LNG exports.

However, he said Shell has yet to make a final decision on any of the projects “one way or another.”

Martin King, a vice president at FirstEnergy Capital, said that given the global slump in LNG prices, there is a “growing possibility that no LNG projects (in British Columbia) will get a final investment decision this side of 2020.”

He said the state of the LNG market has left Canada’s export hopes “in limbo and looking uneconomic.”

Dirk Lever, an institutional equity research specialist at AltaCorp Capital, said that although Shell is not likely to make a decision this year the fact that it has completed all of its regulatory work means the project is “never dead.”

The uncertainty facing LNG Canada has been mixed with a dose of good news.

TransCanada has permits

TransCanada said it has now secured all the permits required to build the Coastal Gaslink Pipeline connecting shale gas basins in northeastern British Columbia to the terminal site in Kitimat.

If Shell and its Asian partners decide this year to proceed with the project construction on the pipeline will start in 2017.

The final two of 10 permits for the 330-mile pipeline were issued by the British Columbia Oil and Gas Commission on May 5.

TransCanada also said the pipeline has been endorsed by 11 First Nations along the right of way and progress is being made with other aboriginal communities.

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