LNG projects inch closer to final investment decisions after key deals
Two liquefied natural gas projects — one in British Columbia, the other in Nova Scotia — are inching toward final investment decisions after securing key deals.
On Thursday, Woodfibre LNG Export Pte Ltd. said it signed its first major deal to sell LNG to the trading unit of BP Plc. The energy giant will buy 0.75 million tonnes per annum of LNG over 15 years from the project based in Squamish, B.C., with first delivery expected in 2023.
The $1.6-billion project, being developed by Hong Kong-based Pacific Oil & Gas Ltd., has reportedly targeted a final investment decision this summer.
“Woodfibre LNG is a tremendous opportunity for British Columbia and Canada to get clean natural gas to growing markets in Asia,” said David Keane, president of Woodfibre LNG.
A day earlier, Pieridae Energy said it is acquiring Shell Canada’s Alberta gas assets for $190 million. The Calgary-based company, which has been accumulating natural gas assets, has now secured the remaining conventional natural gas supply needed for its 10 million tonnes per year Goldsboro plant in Nova Scotia.
Its plan is to export to Europe, mainly Germany, where it has a contract in place with the Düsseldorf-based gas utility Uniper SE.
Alfred Sorenson, the chief executive of Pieridae, said that the next steps for the company were to get a fixed price for the lump sum contract, which is “well on its way,” and to finalize long-term financing. “... So depending on the timing it’ll either be the very end of this year or the very beginning of 2020 that we’ll be ready for a final investment decision,” Sorenson said in an interview.
The Shell assets will allow Pieridae to access up to US$1.5 billion in credit support from the German government under the Untied Loan Guarantees program to develop the upstream assets as part of the Goldboro LNG Project.
Ian Archer, the associate director of North American natural gas at IHS Markit, sees several reasons for the Germans to team up with Pieridae.
“It helps the Germans get off of Russian gas, which is what they’re interested in doing. But one of the stipulations is that it has to be non-frack gas, which is one of the reasons they bought this Shell gas.”
A Nova Scotia base of operations also means a delivery time of six days to markets in Germany, the U.K. and the Netherlands, faster than the U.S. or Russia.
At the other side of the country, Woodfibre has a licence to export 2.1 million tonnes of LNG for 40 years, primarily to the Asian market, which is expected to account for 75 per cent of global demand.
Archer envisions these developments as the next logical step for the Canadian industry, as it slowly challenges major gas rivals Australia and Russia.
Royal Dutch Shell and its Asian partners are also building the $40- billion LNG Canada Ltd. project that’s expected to put Canada firmly on the LNG map, but the progress of smaller projects suggests the industry is revving up and connecting to markets beyond the U.S.
“North American gas industries are very saturated. We see an oversupply continuing and it’s going to remain a low price environment for quite some time,” said Archer. “So if Canada wants to grow the gas business the next logical step would be connecting to global markets and both projects continue to advance that.”