Canada sees west coast LNG revival as world scrambles for gas
29/08/2022 06:00
By Nia Williams
Aug 29 (Reuters) - Canada is taking a second crack at
developing a liquefied natural gas (LNG) export industry on its
west coast a decade after soaring costs and indigenous
opposition derailed a previous wave of proposed LNG terminals.
This time, companies are focusing on smaller west coast
projects they bet will be cheaper and faster to build.
"Smaller project are easier to manage, especially in
Canada," Enbridge chief executive Al Monaco told Reuters in an
interview. "The need for global LNG is clearer now than it was
before, we're getting a second chance and I hope we don't blow
it this time. We've got to get on it right away."
Environmental and regulatory hurdles to pipeline
construction have discouraged new LNG terminals on Canada's
Atlantic coast. urn:newsml:reuters.com:*:nS8N2Y20EX British Columbia's Pacific coast is
close to Canada's vast Montney shale field and Asian markets,
where LNG prices hit a record high last week.
Privately owned Port Edward LNG is raising capital and
negotiating off-take agreements with Asian buyers, a Shell-led
SHEL.L consortium is studying the feasibility of building
Phase 2 of the LNG Canada project and last month Enbridge Inc
ENB.TO outlined a C$1.5 billion investment in Pacific Energy
Corp's Woodfibre LNG project.
Woodfibre will start construction in 2023 and the 14 million
tonne per annum (mtpa) LNG Canada project in Kitimat is under
construction and expected in service in 2025. They are the only
two out of 18 proposed projects to get underway.
Building a large LNG terminal in B.C. costs roughly double
what it does on the U.S. Gulf Coast, The trend, with the
exception of LNG Canada, is for much smaller plants.
STREAMLINED PROCESS
Developers, keen to avoid past mistakes, are securing
support from indigenous people early, said Karen Ogen-Toews, CEO
of the First Nations LNG Alliance. Companies are also modifying
existing infrastructure to avoid lengthy regulatory delays.
"That is one major difference, the scale of these new LNG
projects versus the old ones," said Wood Mackenzie analyst
Dulles Wang. "Producers and developers are conscious of the
financial risk associated with larger projects."
Woodfibre LNG will be a 2.1 mtpa project built on a disused
pulp mill site near Squamish. Port Edward LNG in northern B.C.
will ship just 300,000 tonnes per annum using an existing dock
and gas pipelines, and has engaged investment bankers in Houston
and London to raise C$350 million in financing.
"There's no question this is a more streamlined process,"
Port Edward LNG President Chris Hilliard said. "By not using the
conventional LNG approach we're able to leverage considerable
existing infrastructure."
Exporting from the west coast opens access to world markets
to landlocked Canadian gas producers. But the window to build
new terminals is narrow. With the world targeting net-zero
carbon emissions by 2050, a report by the International
Institute for Sustainable Development warned that Canadian LNG
terminals could become stranded assets.
Project economics could be reconfigured to provide faster
returns on capital, or terminals could one day be converted to
export hydrogen, Federal Natural Resources Minister Jonathan
Wilkinson said.
"I think everybody's trying to get their heads around
exactly how that would work," he told Reuters.
(Additional reporting by Steve Scherer in Ottawa; Editing by
David Gregorio)
((nia.williams@thomsonreuters.com; +1 403 531 1624; Reuters
Messaging: nia.williams.thomsonreuters.com@reuters.net))