CALGARY ? The very first liquefied gas project in Canada may be built on the East Coast, not the West Coast.
Shell puts off decision on LNG megaproject in B.C. for an additional year because it grapples with plummeting oil prices and earnings
The punches keep coming for the Canadian gas and oil industry. The most recent uppercut came from Royal Dutch Shell Plc. on Thursday, because it postponed a choice on its US$40 billion liquefied natural gas export project in Kitimat, B.C. “likely” to the end of the season.
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The companies backing two LNG projects in Quebec appear at first sight still on pace to sanction their multi-billion-dollar facilities this season, while a vital Bc project was dealt a possible setback Wednesday once the Canadian Environmental Assessment Agency said it would hurt porpoise habitat.
The CEAA released a draft of their Environmental Assessment Set of Wednesday, which concluded the $36-billion North american LNG project would “cause significant adverse cumulative environmental effects to harbor porpoise.”
The agency did note the ultimate decision on whether the negative environmental effects are justifiable remains using the federal environment minister and that the work wouldn’t cause significant environmental damage to “all other valued components,” like air quality.
Malaysian national oil company Petronas announced in June it had reached an optimistic final financial commitment around the project – but which was depending on the project receiving a positive environmental assessment in the CEAA.
The company, long considered a front-runner to construct an LNG export project in Canada, didn’t immediately respond to a request for comment.
By contrast, two LNG export companies confirmed they hope to sanction projects in Quebec this year – and perhaps begin construction within the year.
“We are still targeting your final financial commitment at the end of the 3rd quarter 2016,” said Mark Brown, director of project development for Halifax-based Pieridae Energy Ltd., which plans to build the $5- to $10-billion Goldboro LNG plant around the east coast of province at Goldboro.
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The company announced now it had received regulatory approval to chill U.S.-sourced natural gas to the liquid state for export to countries that have not signed free trade agreements using the U.S.
Brown asserted permit was the last major regulatory approval the project needed from national governments, and also the company was applying for a construction permit in the Quebec government before it sanctions the work.
“We are the only ones having a customer. You need customers and we have one for 1 / 2 of the permitted output, which is sufficient to allow us get to FID on a single train,” Brown said.
While other companies have signed memorandums of understanding with potential customers, Brown said his project is best positioned to be the “first mover” because Pieridae has a signed contract with Dusseldorf, Germany-based Uniper Global Commodities S.E. to buy the LNG once it’s processed.
Like Goldboro, LNG Ltd.’s Bear Head LNG project – located further up the coast at Point Tupper in Cape Breton – announced a week ago it had also received permits to export U.S.-sourced gas to non-free-trade agreement countries.
“We are really working towards trying to achieve (your final investment decision) this season for Bear Head, as we have stated the industry has cut against us,” LNG Ltd. chief financial officer Michael Mott said, referring to the continued fall in oil prices, to which LNG costs are linked in overseas markets.
Mott said his Perth, Australia-based company is currently negotiating with a pipeline operator within the U.S. for capacity to import that gas into Quebec and for subsequent export to markets all over the world. The organization is also attempting to lock-up contracts with power companies overseas to buy the LNG after it is processed.
The progress on Canada’s New england is a sharp contrast to the numerous project delays in B.C.
This month, Shell Canada Ltd. announced it would not reach your final investment decision on its LNG Canada project this season, which carries approximately price tag of $25 billion to $40 billion.
The last company considered a front-runner to construct an LNG project in B.C. is Calgary-based AltaGas Ltd., that is inside a tax dispute using the Canadian government over its floating Douglas Channel LNG project, which would be built overseas and tugged over the ocean.
The company has said it won’t sanction that project – because it was likely to do in 2015 – until the tax dispute with Ottawa is resolved. A business spokesperson said Wednesday there wasn’t any update on that dispute.
Mott said LNG Ltd. believes there are “always benefits of to be the first mover” and, assuming it signs the off-take agreements quickly, said he wants Bear Head to be the first project built in Canada.
“We fully believe fundamentally in the gas business and in the worldwide requirement for gas. We are working on finding those customers and sign them up,” Mott said.
“As soon once we discover the off-take (agreements), we will taking action immediately to FID and construct because we are right in the edge with that.”
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