Why Canadian LNG projects are inching forward despite low prices, sagging interest

Canada’s nascent LNG export industry continues to inch forward, despite low commodity prices and speculation of sagging curiosity about the country’s gas resources.

How Big Oil is keeping the faith in Canada’s East Coast: ‘One from the last great undeveloped frontiers’

While exploration activity tapers off in Western Canada, major oil producers continue to keep the faith within the New england. A minimum of for now

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Two projects – around the West Coast, the other around the New england – provided some good news this week for any Canadian liquefied natural gas industry that’s been weakened over the past year as major companies slashed capex budgets and liquefied gas prices fell together with crude oil prices over the past year.

On Monday, Exxon Mobil Corp. submitted a credit card applicatoin to extend the permit of its project in Bc to 4 decades from 25 years and strengthen its global competitiveness. Exxon and it is affiliate Calgary-based Imperial Oil Ltd. intend to export as much as $ 30 million tonnes per year of LNG from either the Kitimat or Prince Rupert site in B.C.

Ottawa approved Exxon’s original application for that WCC LNG project in March 2014, however the company is seeking extra time to take advantage of government incentives to improve the project’s economics.

The group has also “entered into confidentiality agreements with several pipeline companies relating to services for delivery of gas to the LNG terminal,” Exxon said inside a letter towards the National Energy Board.

Exxon’s project is one of 20 proposed around the West Coast, but none has secured your final financial commitment (FID) from backers.

A group led by Royal Shell Plc., received its 40-year permit in January, but deferred an FID decision till the end of the year, while a Petronas-backed consortium has a conditional FID in position but faces strident opposition on environmental grounds.

A number of 130 scientists sent a letter earlier this month to federal environment minister Catherine McKenna to reject the “flawed” Canadian Environmental Assessment Agency report on the Malaysian company’s $36-billion project.

The delays and setbacks are giving smaller projects for example Woodfibre LNG, a part of Singapore-based RGE Pte., an opportunity to secure better deals with its contractors as new projects dry out in Western Canada.

Woodfibre secured key permits this month because of its project near Squamish, B.C., including an eco permit from Ottawa. The company will even seek a 40-year permit and wishes to lower its original price of $1.8 billion, according to Byng Giraud, country manager at Woodfibre LNG Ltd.

“We need to lower capex,” Giraud said within an interview. “There are a lot of sharper pencils and lots more interested contractors and suppliers. Our team is feeling confident we are able to get the ($1.8 billion) number down.”

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The company awarded engineering company KBR Inc. a multi-phased a front-end engineering and style contract this month, but has yet to seal long-term contracts with buyers.

“We will complete the optimization and we should have a much better sense of offtakes at that time, and that still provides for us a chance of an FID this season. That’s still our target,” Giraud said.

While the West Coast gets much of the interest, smaller New england LNG projects are also moving forward.

Australia’s Liquefied Gas Ltd. said Tuesday it’s purchasing additional land and opening an office in Halifax as it proceeds using its Bear Head LNG project in the Strait of Canso in Quebec, after securing a vital U.S. United states doe authorization for exports to countries that do not have a free trade agreement with the country.



“The purchase of additional land is very important for our project. It enables us to increase the capacity of the LNG facility from the nominal eight million tonnes per year (mtpa) as much as 12 mtpa in 2024, according to our approval in the National Energy Board,” Maurice Brand, president of Bear Head LNG said in a statement.

Bear Head will acquire 72 acres of land near its existing 255-acre site, and will boost its plans enables to improve its LNG capacity from eight million tonnes per annum (mtpa)  to 12 mtpa by 2024.

Michael Mott, chief financial officer of LNG Ltd. wouldn’t disclose an FID timeline, but said the company was seeking to source supplies from either offshore East Coast, or in the Utica shale basins and may also tap TransCanada Corp.’s Mainline pipeline, connecting Western Canadian natural gas to the New england.

“We will work hard all of them hard C each of them have challenges but none of them of them are insurmountable,” said Mott.

Spot LNG prices in northeast Asia averaged US$4.460 per million British thermal units (MMBtu) for April, based on Platts, a service provider of energy data, from US$18.11 two years ago.

While the LNG industry remains oversupplied, Mott says many Western Canadian producers are trying to find markets for his or her stranded assets.

“In a macro level financial markets are oversupplied, but a micro level you will find niche players who want to monetize now,” Mott said.

yhussain@nationalpost.com

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