The decision by Malaysian oil and gas company PETRONAS and its partners to abandon plans to build the Pacific NorthWest LNG project in Port Edward has raised concerns around the future of the two proposed LNG projects in Kitimat.
“We are disappointed that the extremely challenging environment brought about by the prolonged depressed prices and shifts in the energy industry have led us to this decision,” said PNW LNG board chairman Anuar Taib in a statement released last week.
B.C. Liberals MLA for Skeena Ellis Ross believes that market conditions alone weren’t responsible for Petronas and its partners’ decision to not go ahead with PNW LNG, and that it will ultimately be the conditions created by the new B.C. government that will determine whether Kitimat LNG and LNG Canada go ahead with their projects in Kitimat.
“We’re going to have to wait and see what government does next,” said Ross. “Will they follow through with putting up taxes, raising the carbon tax and proposing more studies and assessments?”
He believes it likely that the provincial government will make it as difficult as possible for companies to get LNG projects off the ground, creating an investment environment where it is more feasible to look elsewhere to develop projects.
“What these industries are going to look at is what government is going to do to convince them to build a project.
The companies have to look at the bottom line, think about their capital costs and their returns,” said Ross.
He said companies looking to invest in LNG will probably look to invest elsewhere if the conditions are unfavourable for investment.
“People think that by stopping these projects, they’re stopping the LNG industry. They are wrong. The only thing that will happen is that the product will be sent to the U.S. where the U.S. will take a cut and the product will still get to the Asian markets,” said Ross.
He said the U.S. is currently “welcoming LNG with open arms”.
“There’s a proposal to ship LNG out of Alberta to the U.S. at $2, to sell it to Mexico for $3. It’s also rumoured that U.S. companies are courting B.C. natural gas producers with the same proposal,” he added.
Depending on the marketplace, the price of natural gas is expressed in US dollars, (or other currency) per thousand cubic feet (Mcf), or a thousand cubic meters.- Wiki
Ross said opponents of the development of LNG in B.C. were playing into the hands of LNG producers in the U.S.
“If we’re dependent on the U.S. market, then the U.S. will call the shots, which is what we’re seeing now with the softwood lumber supply - they’re always trying to get the upper hand,” said Ross.
NDP MP for Skeena-Bulkley Valley Nathan Cullen said the failure of PNW LNG to take off was as a result of both changing market conditions and the project’s inability to gain the support of local and broader communities.
“The Northwest will always welcome well designed and locally supported projects that respect First Nations rights and title, provide local jobs, and are economically and environmentally stable,” Cullen said. “Large resource projects can and do happen here.
Chevron Canada Communications Lead Ray Lord said the company and its co-venturer Woodside remain committed to the Kitimat LNG project.
“We are focused on delivering a globally competitive project that is ready at the right time and aligned with LNG market demand,” said Lord.
He said before reaching a final investment decision, Kitimat LNG was continuing to work towards a number of goals, including securing LNG sales agreements, building support for the project among First Nations and local communities and completing the current phase of the appraisal program for the Liard upstream natural gas resource in Northeastern B.C.
LNG Canada didn’t have a spokesperson available to comment on the decision by Petronas and its partners and the future of LNG Canada in Kitimat.
An emailed reply received from the company states that while LNG Canada doesn’t comment on the decisions of other projects or companies, LNG Canada was working on completing key activities necessary for moving the project towards a future Final Investment Decision.
“This includes ongoing negotiations with an Engineering, Procurement and Construction (EPC) contractor, completing outstanding permits, and continuing to engage and consult with community stakeholders and First Nations as part of our compliance and consultation activities.”
The email said LNG Canada had issued a Request for Proposal and that four teams are currently preparing their responses.
“Once we receive these, LNG Canada will need to take time to thoroughly review the proposals prior to entering into negotiations with any of the proposers,” read the emailed reply.
District of Kitimat business and communications officer Josh Marsh said the cancellation of PNW LNG wouldn’t impact LNG Canada and Kitimat LNG.
“All of the proposed LNG projects in B.C. are different and therefore, will be assessed by proponents on an individual basis,” said Marsh.
He maintained that the district is supportive of safe and sustainable economic development in the region and that Kitimat is ideally situated to become a centre for exporting LNG and other Canadian products to international markets.
“We remain optimistic about the potential of an LNG export industry in Kitimat,” said Marsh.