CALGARY ? The very first liquefied natural gas project in Canada might be built on the East Coast, not free airline Coast.
Shell puts off decision on LNG megaproject in B.C. for another year because it grapples with plummeting oil prices and earnings
The punches keep coming for the Canadian oil and gas industry. The most recent uppercut came from Royal Dutch Shell Plc. on Thursday, as it postponed a decision on its US$40 billion liquefied gas export project in Kitimat, B.C. “likely” towards the end of the season.
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The companies backing two LNG projects in Quebec appear at first sight still on pace to sanction their multi-billion-dollar facilities this year, while a vital Bc project was dealt a possible setback Wednesday when the Canadian Environmental Assessment Agency said it would hurt porpoise habitat.
The CEAA released a draft of their Environmental Assessment Set of Wednesday, which concluded the $36-billion Pacific Northwest LNG project would “cause significant adverse cumulative environmental effects to harbor porpoise.”
The agency did note the final decision on whether the negative environmental effects are justifiable remains with the federal environment minister which the work would not cause significant environmental harm to “all other valued components,” like quality of air.
Malaysian national oil company Petronas announced in June it had reached a positive final financial commitment on the project – but which was depending on the work receiving a positive environmental assessment in the CEAA.
The company, long considered a front-runner to construct an LNG export project in Canada, didn’t immediately respond to a request for comment.
By contrast, two LNG export companies confirmed they aspire to sanction projects in Nova Scotia this season – and possibly begin construction inside the year.
“We continue to be targeting your final financial commitment at the end of the third quarter 2016,” said Mark Brown, director of project development for Halifax-based Pieridae Energy Ltd., which intends to build the $5- to $10-billion Goldboro LNG plant around the new england of province at Goldboro.
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The company announced now it had received regulatory approval to chill U.S.-sourced natural gas to its liquid state for export to countries that have not signed free trade agreements with the U.S.
Brown asserted permit was the last major regulatory approval the project needed from national governments, and also the company was applying for a construction permit in the Nova Scotia government before it sanctions the project.
“We are the only ones having a customer. You’ll need customers and that we have one for 1 / 2 of the permitted output, that is sufficient to allow us reach FID on a single train,” Brown said.
While other companies have signed memorandums of understanding with prospective customers, Brown said his project is best positioned to become the “first mover” because Pieridae has a signed contract with Dusseldorf, Germany-based Uniper Global Commodities S.E. to purchase the LNG once it is processed.
Like Goldboro, LNG Ltd.’s Bear Head LNG project – located further up the coast at Point Tupper in Cape Breton – announced last week it had also received permits to export U.S.-sourced gas to non-free-trade agreement countries.
“We are really working towards trying to achieve (a final financial commitment) this season for Bear Head, as we have stated the industry has cut against us,” LNG Ltd. chief financial officer Michael Mott said, talking about the continued fall in oil prices, that LNG costs are linked in overseas markets.
Mott said his Perth, Australia-based clients are currently negotiating having a pipeline operator within the U.S. for capacity to import that gas into Nova Scotia as well as for subsequent export to markets around the world. The company can also be attempting to lock-up contracts with utility companies overseas to buy the LNG after it is processed.
The progress on Canada’s New england is a sharp contrast to the numerous project delays in B.C.
This month, Shell Canada Ltd. announced it would not reach a final investment decision on its LNG Canada project this year, which carries approximately cost of $25 billion to $40 billion.
The last company considered a front-runner to construct an LNG project in B.C. is Calgary-based AltaGas Ltd., which is inside a tax dispute with the Canadian government over its floating Douglas Channel LNG project, which may be built overseas and tugged over the ocean.
The company has said it’s not going to sanction that project – because it was expected to do in 2015 – until the tax dispute with Ottawa is resolved. A business spokesperson said Wednesday there was no update with that dispute.
Mott said LNG Ltd. believes you will find “always benefits of to be the first mover” and, assuming it signs the off-take agreements quickly, said he wants Bear Head to function as the first project built in Canada.
“We fully believe fundamentally in the gas business and in the global need for gas. We’re focusing on finding those customers and sign them up,” Mott said.
“As soon once we discover the off-take (agreements), we will move quickly to FID and construct because we are right in the edge with that.”
Financial Post
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