LNG CANADA FU­ELLING NEW CON­FI­DENCE

Vancouver Sun - - CITY - CHRIS VAR­COE Chris Var­coe is a Cal­gary Her­ald colum­nist. cvar­coe@post­media.com

One and done, or more to come?

Fresh off a de­ci­sion by Royal Dutch Shell and its part­ners to con­struct the coun­try’s first liq­ue­fied nat­u­ral gas de­vel­op­ment, the en­ergy in­dus­try is grow­ing con­fi­dent it will pro­pel other Cana­dian LNG pro­pos­als to move ahead.

The chief ex­ec­u­tive of LNG Canada be­lieves the pos­i­tive fi­nal in­vest­ment de­ci­sion has given “a de­gree of com­fort and en­cour­age­ment” to sim­i­lar pro­pos­als try­ing to make it across the fin­ish line.

“There are a num­ber of other projects in (the) ad­vanced de­vel­op­ment stage and they will feel em­bold­ened by what we have done,” Andy Calitz said this week be­fore speak­ing at the En­ergy Round­table con­fer­ence in Cal­gary. “Based on the un­der­stand­ing of the state of de­vel­op­ment of at least three other projects in B.C., I will not be sur­prised if there is one more FID.”

Last week’s an­nounce­ment that Shell, Petronas, PetroChina, Mit­subishi Corp. and Korea Gas Corp. will build the project at Kiti­mat, B.C., was a game-chang­ing mo­ment.

The $40-bil­lion project is not only the largest pri­vate-sec­tor in­vest­ment in the coun­try’s his­tory, it rep­re­sents some­thing else for the oil­patch: con­fi­dence.

Af­ter see­ing big-ticket projects like North­ern Gate­way, En­ergy East, the Pa­cific North­West LNG and Aurora LNG projects flail and fi­nally fail, five in­ter­na­tional com­pa­nies have com­mit­ted to in­vest­ing bil­lions of dol­lars in this coun­try.

“It’s brought real cred­i­bil­ity back into the Cana­dian en­ergy sec­tor,” said Pieri­dae En­ergy CEO Al­fred Sorensen, who is work­ing on the $10-bil­lion Gold­boro LNG project in Nova Sco­tia.

“It’s al­most like ... in­ter­na­tion­ally, peo­ple have said, ‘OK, it looks like LNG from Canada is do-able, if it’s done the right way,’” added Vic­tor Ojeda, pres­i­dent of Steel­head LNG, which wants to build a fa­cil­ity on the west coast of Van­cou­ver Is­land.

For those who want to see the coun­try ex­port its en­ergy re­sources be­yond the United States, the LNG Canada de­ci­sion is a sem­i­nal mo­ment. By the mid­dle of next decade, su­per­cooled nat­u­ral gas from Western Canada will be shipped into Asian mar­kets, in­clud­ing China, Korea and Ja­pan.

Ac­cord­ing to a Na­tional En­ergy Board re­port, the reg­u­la­tor has re­ceived 43 LNG ex­port li­cence ap­pli­ca­tions since 2010, rep­re­sent­ing 24 projects — in­clud­ing 18 on the Pa­cific coast.

Most pro­pos­als stalled out af­ter global LNG prices fell sev­eral years ago. With de­mand for nat­u­ral gas grow­ing to re­place coal, a new wave of projects is ex­pected to be built by the mid­dle of the next decade.

A re­port by en­ergy con­sul­tancy IHS Markit said the de­ci­sion by Shell and its part­ners to build could act “as a start­ing gun” for other LNG projects to pro­ceed.

“We will see a re­newal in liq­ue­fac­tion projects be­ing ap­proved glob­ally. Whether or not Canada gets those projects is still a bit of an open ques­tion,” said Ian Archer, as­so­ciate direc­tor of North Amer­i­can nat­u­ral gas for IHS. Each pro­posal on the draw­ing board will face its own set of chal­lenges.

At the en­ergy con­fer­ence, Calitz spoke about the “long and wind­ing road” it took to at­tain ap­proval for the megapro­ject.

Un­like other de­vel­op­ments, he noted LNG Canada is lo­cated ex­clu­sively within Bri­tish Columbia, the pro­po­nents have a good long-term re­la­tion­ship with af­fected First Na­tions and lo­cal com­mu­ni­ties, the project is cost-com­pet­i­tive and it will use hy­dro elec­tric­ity to lower its green­house gas emis­sions.

“En­ergy projects have so many hur­dles to cross,” he said. “We got it in the golden spot of tak­ing an FID.”

En­ergy pro­duc­ers and other LNG pro­po­nents are hop­ing the de­ci­sion will put wind in their sails. “It’s good for Canada, good for in­vestor con­fi­dence. It res­onates very strongly across the cor­po­ra­tion,” said Frank Cas­sulo, pres­i­dent of Chevron Canada, which has its own Kiti­mat LNG Project, a joint ven­ture with Aus­tralia’s Wood­side Petroleum.

While there are 18 pro­posed LNG projects on the books for the west coast, only three are “go­ing con­cerns” — Steel­head LNG, Wood­fi­bre LNG and Chevron’s Kiti­mat project — ac­cord­ing to a B.C. govern­ment of­fi­cial.

Archer be­lieves the Wood­fi­bre LNG project is the most ad­vanced and likely to pro­ceed, with its plans to con­struct a smaller pro­cess­ing and ex­port fa­cil­ity south­west of Squamish.

Wood­fi­bre of­fi­cials are work­ing on an en­gi­neer­ing, pro­cure­ment and con­struc­tion con­tract with Hous­ton-based KBR Inc., and ex­pect con­struc­tion to start some­time in 2019.

Other pro­po­nents hope the LNG Canada project will give the Cana­dian en­ergy sec­tor some mo­men­tum and make be­liev­ers out of the naysay­ers.

“It takes a long time to get the first project out of the gate in any new ju­ris­dic­tion,” said Ojeda.

On the east coast, Pieri­dae is mov­ing to­ward the fin­ish line on giv­ing a green light to the Gold­boro project, which would ship nat­u­ral gas from Al­berta to Nova Sco­tia for even­tual ex­port into Europe.

The com­pany is wait­ing for the pro­vin­cial govern­ment to is­sue con­struc­tion per­mits within the next two weeks. A fi­nal in­vest­ment de­ci­sion is ex­pected to take place in late Novem­ber.

While the court de­ci­sion that quashed the fed­eral ap­proval of the Trans Moun­tain oil pipe­line ex­pan­sion in Au­gust sent out a neg­a­tive sig­nal about build­ing en­ergy projects in the coun­try, the new LNG de­ci­sion “was the ex­act op­po­site,” Sorensen said.

“It re­ally brings con­fi­dence back to in­vestors,” he told re­porters af­ter the con­fer­ence.

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