Newsletter: LNG Canada to expand?

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Our newsletter 04 August 2022

Resolution by LNG Canada and TC Energy of key financial issues around the Coast GasLink pipeline, and growing Asian demand for LNG, have given rise to speculation as to whether LNG Canada will speed up expansion.

Market monitors have reported that Shell, the senior partner in LNG Canada, is actively considering an early move on Phase Two, which would boost the project to four producing “trains” from two, and double output to 26 million tonnes a year.

There has been nothing official on this from Shell or LNG Canada, but speculation increased after TC Energy CEO François Poirier, said: “We anticipate a potential second phase of Coastal GasLink could enhance TC Energy’s project returns.”

At the same time, TC Energy and LNG Canada spread encouraging word that they have resolved outstanding cost and payment issues.

TC Energy, parent of Coastal GasLink, added that the expected pipeline costs have soared $11.2 billion, up from $6.6 billion. But Poirier said: ‘We continue to believe the project remains economically viable.’

Meanwhile, Coastal GasLink reported that the line will be approximately 70% complete this summer. And added: “With over $1.4 billion in contracting opportunities with Indigenous and local communities, we are leading the way for how energy projects are advanced in Canada!”

LNG Canada’s latest update reported: “LNG Canada and its prime contractor, JGC Fluor, have to date awarded more than $3.7 billion in procurement and contracts to companies in B.C. And of that amount, almost $3 billion has been awarded to local and Indigenous companies.

The update also underlined that the target for the first export shipment is still “the middle of the decade.”

Enbridge joins Woodfibre LNG

The market-watchers were pleasantly surprised by the word that Enbridge, Canada’s third-largest company, is becoming a partner in the Woodfibre LNG project on Howe Sound.

Enbridge announced it will take a 30% ownership stake in the $5.1-billion Woodfibre LNG project. It includes a contribution for expansion of FortisBC’s Eagle Mountain pipeline, which will feed gas to Woodfibre via FortisBC’s system and Enbridge’s T-South natural gas transmission system.

Both Enbridge and Woodfibre noted: “Woodfibre LNG . . . has received all major federal, provincial and First Nations approvals.” The Squamish Nation is both a partner and a regulator of the project.

Woodfibre will produce 2.1 million tonnes of LNG a year, “underpinned by two long-term offtake agreements with BP Gas Marketing Limited for 15 years representing 70% of the capacity, with additional commitments in development for up to 90%.“

Woodfibre LNG announced in April that it had issued Notice to Proceed to engineering and construction company McDermott International, and that the project is expected to be in service in 2027.

(Re: the abbreviations atop the columns in the graphic: mtpa – millions of tonnes per annum; bcm/yr = billions of cubic metres per year; bcf/day = billions of cubic feet per day.)

BC LNG: progress, but slow

While in our items above we note progress toward exports of BC LNG, we also pointed out in our blog that it’s been a longer and sadder road than we had hoped for.

At one point, five years ago, there were as many as 20 LNG projects planned, proposed or talked about for BC.

You know where we are today: LNG Canada, Woodfibre LNG, plus Fortis BC and its Tilbury LNG plant and Tilbury Pacific LNG jetty, and small-scale Port Edward LNG soon to begin preparatory work in advance of construction.

As well, we have Cedar LNG, owned and led by the Haisla Nation, which hopes for a start on construction in 2023, and the Nisga’a Nation’s Ksi Lisims LNG, that says construction could begin in 2024 (dates for both depending on regulators).

And there’s chatter from Ottawa about the possibility of LNG exports to Europe via Canada’s east coast.

But the U.S. has taken a huge lead. It has seven LNG export terminals in operation today (though one is temporarily shut down for repairs), plus three more being built, nine approved but not yet under construction, and another five going through federal reviews.

A comparison of Canada vs US LNG exports, from the Canadian Association of Petroleum Producers, shows major missed opportunity.

And thanks to European demand for LNG, the U.S. became the world’s largest LNG exporter in the first half of 2022.

But the U.S. is also eyeing some LNG projects in Mexico, and one in Alaska, as a way of exporting LNG to Asia in competition with B.C.

ALSO IN THE NEWS

DATES

  • Registration is open for popular Nation2Nation community events, in Terrace on Thursday Sept. 22, and Prince Rupert on Thursday Oct. 20. Info/register: http://ow.ly/Fvjf50K7FrW You’ll see there that Indigenous attendees are eligible for a discount, and see how to get your discount code.
  • The 20th BC Natural Resources Forum will take place in Prince George Jan. 17-19: http://ow.ly/hopU50K9u8e
  • The First Nation’s Major Projects Coalition has set its 2023 Industry Engagement Event (“The Values Driven Economy Conference”) for April 24-25 in Vancouver: http://ow.ly/T4Il50JNtoe
  • The Forward Summit’s 2023 event is set for May 17-18, at the Grey Eagle Resort & Casino near Calgary. Registration: http://ow.ly/Q8ZV50K7FYb (Note there’s an Indigenous discount.)

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