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Canada LNG Construction Could Start This Year

LNG vessels

A US$31.1-billion (C$40-billion) LNG project in British Columbia could begin construction by the end of the year as rising oil prices have improved the investment capacity of the companies involved in it.

Canada LNG was hailed as a huge opportunity for the B.C. economy back in the early 2010s, but when oil prices started sliding in 2014, the companies involved in the project, including Shell, Kogas, PetroChina, and Mitsubishi Corp., became warier of substantial investments. In 2016, the final investment decision for the project was delayed until this year.

Now, thanks to higher oil prices, the consortium will begin construction before the year’s end, the project’s chief executive Andy Calitz told media. “It didn’t make sense in July 2016,” Calitz said. “When (our stakeholders) asked the inevitable question, when will you reconsider the FID? Our answer was: We will be in construction in 2018. I reaffirm that commitment today.”

The last two British Columbia governments have been very supportive of LNG project: LNG is a cleaner fuel than diluted bitumen and it can allow local gas producers to tap Asian markets—the focus of every LNG producer, as demand there is the greatest.

However, the 2014 downturn curbed everyone’s enthusiasm as it reduced the amount of cash available for such major investments. Last year, B.C. LNG proponents suffered a severe blow when Malaysia’s Petronas decided to quit its US$29-billion Pacific NorthWest LNG project as a result of a slump in LNG prices.

Related: OPEC: The Oil Glut Is Gone

It looks like Canada LNG will have a different fate, however. The NDP government has offered incentives to energy companies active in LNG, and the consortium also hopes to get some tax breaks from the federal government as well.

One sticking point between the consortium and Ottawa is a federal anti-dumping duty on imports of fabricated steel components, the Globe and Mail reports, citing Canada LNG’s external relations director Susannah Pierce as saying, “We have confidence in our position and believe the facts speak for themselves. Large, complex modules cannot be constructed in Canada, as we have demonstrated throughout the trade remedy process to date. We also feel confident that government will recognize the importance of LNG and investments like ours that support Indigenous opportunities, while providing an important resource for a lower carbon economy.”

By Irina Slav for Oilprice.com

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