Canada’s approach to energy projects ‘definition of insanity,’ analyst says
Regulatory delays, higher costs among obstacles facing projects, conference told
Canadian oil and gas companies and multiple levels of government are living out “the definition of insanity” by trying the same failed process over and over to build and approve new major energy projects.
During a panel discussion at an event Wednesday to discuss energy issues, executives from companies representing proposed liquefied natural gas projects in British Columbia blasted regulatory delays in Canada that have already led to project cancellations.
Dennis Lawrence, vice-president for production of Petronas-owned Progress Energy Ltd., said the drawn-out regulatory process in Canada impeded his parent company’s ability to build its $36-billion Pacific NorthWest LNG project, which was cancelled in July.
“We think that it may be a bit of a wake-up call to us as an industry, to governments, to regulators within Canada that time is of utmost importance on these projects; that delays and long regulatory timelines can ultimately have an impact on whether projects go ahead or not,” Lawrence said.
Lawrence said the company is “looking hard” at other LNG projects and opportunities to invest in petrochemical plants following the decision to cancel the project near Prince Rupert, B.C. The company “is in the very early stages” of considering investments in those other projects, he said.
Progress has also signed up to ship 700 million cubic feet of gas per day on TransCanada’s proposed main-line expansion from northeastern B.C. into the Alberta market. That pipeline expansion is expected to be in service in 2019.
In September, China’s CNOOC Nexen cancelled its planned Aurora LNG project, which was also sited near Prince Rupert, B.C.
Dave Tulk, principal at consulting firm Gas Processing Management Inc., suggested more energy projects could be cancelled if the same types of delays that hurt Petronas and CNOOC Nexen LNG projects are repeated.
Trying the same failed approach on future LNG projects is “the definition of insanity,” Tulk said, noting that he was pessimistic about the industry’s future because “we’re not seeing a fundamental change from what has happened over the last number of years.
“We’re not seeing the vision and leadership coming from industry nor the co-ordinated governments in Alberta, B.C. and the federal government. In our view, without that pulling together and that vision of leadership, we’re just going to keep doing the same things we’re doing,” he said.
Despite the regulatory delays and other impediments — including higher project costs in Canada — the head of Shell Canada Ltd.’s proposed LNG project reiterated his company is ready to make a decision on its project next year.
LNG Canada CEO Andy Calitz said 38 countries are now LNG importers and demand for the chilled gas has grown to 260 million tonnes per year. “Every year, two or three more countries are added to that list,” he said.
Calitz said Canadian projects need to be built before more competing projects are announced in Oregon, the U.S. Gulf Coast and places like Mozambique and Qatar.