Sitting at the same table, Premiers John Horgan and Jason Kenney remained deeply divided this week over the Trans Mountain oil pipeline, but still found common cause on another front.Liquefied natural gas.Two proposed LNG projects made progress this week, sparking hope another facility will soon be under construction after the $40-billion LNG Canada development at Kitimat, B.C., was approved last fall.The two leaders chatted about the “great opportunities of liquefied natural gas,” Kenney said at the end of the Western Canadian premiers’ meeting in Edmonton.“We would love to see a second major LNG project of a similar scale and we will do everything we can to facilitate that, and I believe Premier Horgan stands ready to support that,” Alberta’s premier told reporters.“That’s an area where we have found common ground that would be beneficial to both provinces.”
B.C. Premier John Horgan.
MARTIN OUELLET-DIOTTE/AFP/Getty Images
The two premiers, along with Western Canada’s natural gas industry, may soon get their wish.Two separate proposals to export super-chilled Canadian natural gas advanced closer toward a final investment decision (FID) on building liquefaction terminals.On the west coast, Woodfibre LNG inked an off-take agreement with a subsidiary of super-major BP Plc for the delivery of LNG from the project, located southwest of Squamish.If the $1.6-billion project is built, Woodfibre will provide 0.75 million tonnes annually of LNG — about a third of its total output — over 15 years to BP.Meanwhile, Calgary-based Pieridae Energy announced it will spend $190 million to acquire natural gas production and three gas plants in Alberta from Shell Canada.The gas will feed Pieridae’s proposed Goldboro LNG facility to be built in Nova Scotia.By acquiring almost 29,000 barrels of oil equivalent (BOE) per day from Shell, Pieridae now has enough gas resource — along with production from a previous deal — to supply its facility.Taken together, the announcements have significantly improved the prospects of more than one LNG project being built in Canada, said Ian Archer, associate director of North American natural gas for IHS Markit.“Right now, there seems to be a fire lit underneath Canadian LNG, to get projects a (final investment decision) and be the next wave of LNG development globally,” he said Thursday.LNG is critical for the future success of Canada’s natural gas industry. The country has huge resources but is losing market share in the United States to American producers.The Montney formation, on both sides of the Alberta and British Columbia border, contains an estimated 449 trillion cubic feet of marketable gas, making it one of the largest-known natural gas resources in the world, according to the National Energy Board.And demand for natural gas is growing.
According to the International Energy Agency, the global LNG market will expand by 26 per cent by 2024. After falling for several years, LNG investment rebounded last year, however, more facilities will be needed in the future, it said.These factors should open the door to Canada.“We’re all watching with anticipation because it’s really important if we can get a second project … it shows clearly this is not a one-project jurisdiction,” said Bryan Cox, head of the B.C. LNG Alliance.However, such projects take years to build, require global customers, cost billions of dollars to complete and require broad community support.Only one development — the LNG Canada initiative, led by Royal Dutch Shell — has moved into the construction phase, despite 24 separate proposals being on the drawing board at one point.Woodfibre officials say they’re hoping to make a final investment decision sometime this summer and start construction by year’s end, with production beginning in 2023.Byng Giraud, Woodfibre LNG vice-president of business development, said the Canadian industry has regained momentum after hitting pause a couple of years ago amid a spate of new projects around the world.Other projects in Canada are also being considered today.“I call it the cool-kid scenario. When the first cool kid goes to the party, then suddenly all the cool kids want to go,” he said Friday.For Pieridae Energy, the company will pay $175 million and issue $15 million in common shares to Shell to acquire the gas assets in Alberta.
Shell and its partners are building Canada’s first LNG export terminal in northern British Columbia, but the company has scaled back operations elsewhere in the country, including in Alberta’s oilsands.
Pieridae CEO Alfred Sorensen said Shell approached it about a possible sale, noting the deal will give the company better economies of scale for its existing upstream operations.“This is a really big step for us. It’s a big supply base … and it very much financially solidifies our company as well,” he said.“We are very close to being ready to go.”The company is waiting for a front-end engineering and design study and final construction costs for its LNG plant. The process is expected to take about eight more months to complete.Arranging financing is the other critical item to secure before the project can proceed, Sorensen said.These latest developments are positive signs for the sector.At the same time, political support is growing for more projects to be built, given the jobs, scale of investment, and LNG’s ability to displace higher-emitting sources of global energy, such as coal.
Smoke belches from a coal-fuelled power station near Datong, in China’s northern Shanxi province, in a file photo from Nov. 19, 2015.
Greg Baker/AFP/Getty Images
Having various levels of government, such as British Columbia, Alberta and Ottawa working together is important. With regulatory overlap between the provinces and federal government, collaboration will be essential.“You have to treat it more like when you’re pursuing an Olympic bid, where you have to actually get behind it and say we’re going to accomplish this collectively,” said Giraud.Sorensen doesn’t see the push to build LNG projects as a competition because more export facilities are needed on both coasts to supply global markets.“If none of these projects happen, I don’t know what happens to the (natural gas) industry,” he said.“It’s a good thing to have multiple projects, just because the amount of gas that’s available.”Chris Varcoe is a Calgary Herald firstname.lastname@example.org