LNG’S UNLIKELY SAVIOUR
B.C.’s NDP Premier John Horgan to promote industry on tour of Asia
To the surprise of many, British Columbia NDP Premier John Horgan could emerge as the saviour of Western Canada’s troubled liquefied natural gas industry.
Horgan is leaving Saturday for a 10-day mission to Asia and will have meetings in China, Korea and Japan with backers of two proposed LNG projects: LNG Canada, sited in Kitimat and led by Royal Dutch Shell PLC with partners PetroChina, Korea Gas Corp. and Mitsubishi Corp. of Japan; and Woodfibre LNG, located north of Vancouver in Squamish, and owned by the RGE group of companies based in Singapore.
Meanwhile, Kitimat LNG, a joint venture between Chevron Corp. and Australia’s Woodside Petroleum Ltd., is re-emerging as a player with Horgan’s support and is working to improve the competitiveness of its proposed plant.
The three projects are viewed as front-runners to build on the B.C. coast after years of market, regulatory and political setbacks that led to the cancellation of two major projects and the retreat of many others.
Hurdles remain, but improved LNG prices, rising global demand and First Nations’ support seem to be fuelling Horgan’s interest after criticizing the LNG industry during the provincial election campaign last year.
“I think we have a real opportunity of perhaps landing one or two LNG facilities here in British Columbia,” Horgan told Stewart Muir, executive director of Resource Works Society, in an interview at a natural resources conference in Prince George this week.
“That is exciting, and we are going to be talking about that in China, Korea and Japan.”
Horgan, in an interview with Alaska Highway News in December, said he wants B.C.’s natural gas to get higher prices through LNG exports.
“The advent of hydraulic fracturing has meant North America is awash in gas and that’s driving the price down, making it difficult for producers in the Peace to succeed,” he said.
“I think there’s a bright future for natural gas in the Peace and in British Columbia, but we want to make sure we’re meeting our climate objectives. We’re serious about reducing our emissions, I know the industry is as well.”
Horgan’s new-found backing of LNG is surprising given that his party needs the support of the anti-fossil-fuel Green Party to maintain a slim majority in the legislature. But he sounds a lot more business-friendly than a year ago, when he was campaigning to defeat Christy Clark’s Liberal government and his views on LNG ranged from non-committal to hostile.
Those views were partly behind Malaysia-based Petronas’s decision last July to kill its $36-billion Pacific NorthWest LNG project. A couple of months later, Nexen Energy ULC, the Canadian subsidiary of Chinese oil giant CNOOC Ltd., along with Japanese partner INPEX, pulled the plug on a feasibility study to build the $28-billion Aurora LNG project.
The province’s reputation as a place to invest in energy was further damaged by Horgan’s opposition to the Trans Mountain pipeline expansion and his threat to cancel the Site C hydro project in mid-construction.
But the premier has moderated his views, much like Alberta’s NDP government, which initially knocked the oil industry, then became its cheerleader after realizing it needs the taxes and royalties generated by fossil fuels to pay for programs.
Horgan gave the go-ahead to finish the Site C hydro project and has been meeting privately with LNG proponents to see what can be done to get their projects to the construction stage.
“Those of us who are actively pursuing projects feel (we) have the support of this government … we are pleasantly surprised,” said Byng Giraud, country manager for Woodfibre LNG.
“The new minister of energy has been easy to meet and they are engaged in looking at what are the levers that are preventing this from moving forward. The outcome of that remains to be seen, but, right now, they are saying the things we want to hear.”
Giraud said his company’s decision-makers are meeting with Horgan in China during the trade mission.
“We want to … show the premier that the Chinese are extremely interested in this product if we can get the right price,” he said. “They want Canadian gas, but not at any price.”
Woodfibre will continue to look for cost savings before deciding whether to move ahead with a $1.6-billion liquefied natural gas plant in partnership with the Squamish Nation.
Meetings between Horgan and LNG Canada’s Asian partners during the trade mission — his first since the NDP formed a government last summer — are good news for the project, which should receive a final investment decision in the second half of 2018.
The project’s major remaining stumbling block is the federal anti-dumping duties on industrial steel components made in China and South Korea that would increase costs.
The project has applied for exemptions in the courts and with the federal finance department.
As for Kitimat LNG, Ray Lord, communications lead at Chevron Canada Ltd., said Horgan recently re-affirmed his government’s support for the project and offered to look at opportunities to make it competitive.
“The current market for new LNG projects is challenged as significant supply from recently completed major projects and new supply sources exceeds current demand,” Lord said in an emailed statement. “However, a significant opportunity exists for new competitive projects to supply LNG to Asia during the next decade.”
A target date to make a final investment decision on the project has not been set, he said.
But industry proponents said Horgan can make a big difference to Canada’s depressed natural gas industry by leading the startup of LNG facilities on the B.C. coast.
LNG is not the greenest energy source, but it would be subject to emissions standards that would make any from B.C. the world’s cleanest, according to the previous Liberal government.
It would also provide an “unprecedented opportunity for First Nations to take part in the creation of a new resource industry and see the benefits directly in their communities,” Fort St. John Mayor Lori Ackerman and Dawson Creek Mayor Dale Bumstead said in an open letter this week.
The mayors urged the province and the federal government to get on with it. Horgan, at least, has apparently made a start.