LNG Canada delays FID

Despite overwheming community support, disappointing news announced on Monday

Disappointing. That’s the word that comes up most when people in Kitimat are asked about last Monday’s decision.

LNG Canada’s joint venture partners, Shell, PetroChina, Mitsubishi, and Kogas, announced that they would be unable to make a final investment decision as anticipated in December.

The December timeline, which many in the community had been planning around, was announced in February of this year, after the partners released that they were pushing the final investment decision back, from the original plan of the first quarter of 2016.

Low gas prices that have caused economic hardships in Alberta and Northeastern BC are the source of the delay, making it difficult to reach or create a market for the natural gas that would be drilled near Dawson Creek.

The $40 billion proposed liquifaction facility would cool the natural gas to a temperature of approximately -161 degrees Celsius, and then load the liquid product onto a gas carrier to be shipped to Asian markets overseas.

The gas would be transported to Kitimat from Dawson Creek through the Coastal GasLink Pipeline, which is owned by TransCanada.

Mayor Phil Germuth said that while the news was disappointing, it didn’t come as a complete surprise to him and the District staff.

Of course we were a bit disappointed, but we weren’t overly surprised. When all these projects were announced in 2011, the price of oil was up around $120 a barrel, and now it’s down to $50,” he told the Northern Sentinel.

Every one of the major LNG proponents, they’re all in the same situation,” he added.

This is not unique to LNG Canada, their ability to fund a project of this size all comes from what the price of oil is.”

This delay, you can’t blame it on anybody, you can’t blame it on provincial government, federal government, it is the price of oil, and none of us have control over that.”

Susannah Pierce, Director of External Relations for LNG Canada, said that the company is still in the process of figuring out what the next few months are going to look like at the site at the former Methanex plant, as well as how the future timeline for the final investment decision (FID) will be decided.

We’re still in the process of figuring out what that looks like, in terms of additional site activity, and how we would continue to do the work, based on what we’re currently discussing with our joint venture partners on a new FID timeline,” she said.

We haven’t got any definitive answers yet, but we are working towards that.”

Putting together a new schedule associated with work, budgets, and all that, it’s not like we can do all of that overnight, because you’re talking about a very, very integrated plan that involves hundreds of contractors, that involves hundreds of millions of dollars. It takes time.”

Pierce said that the joint venture partners are committed to finding a new timeline for an FID, and they continue to see LNG Canada as a project they would like to see come to fruition.

For them right now, it’s making sure that under our new timeline we’ve got the right work, as well as a supporting budget to get carried through to the FID date, she said.”

Haisla Chief Councillor Ellis Ross said the announcement was an emotional one for his organization and membership, who have worked with LNG Canada from early on in the development.

What it means for us right now, we’ve got to rethink what we’re going to do over the next two years, in terms of economic development. It’s a sobering reality for us, that we’ve got to think about our own types of projects, that we develop on our own and then we go to get help on, instead of reacting to somebody else’s project, and depending on somebody else to see their project through,” he told the Northern Sentinel.

It really shook up our organization, and our thought process in terms of what the next couple years are going to look like.”

Ross is confident in his council at the Haisla Nation, and believes that there are many opportunities for the nation to move forward economically, including hearing proposals from smaller ventures that are interested in Kitimat.

We’re getting a lot of phone calls now from a lot of different interested parties saying ‘we have an interest in coming up there, can we sit down and talk” and my response is there’s no harm in talking,” he said.

We need to see details now, and we need to see really firm, concrete proposals, no speculative, long drawn out, six year project processes,” he added.

I’ve got an organization that realizes we need to get back to work. Our membership is depending on us, and from what I can understand, there’s a number of organizations out there in Kitimat and Terrace looking at us to see what we do next.”

So what does it mean for us now? Well, okay it’s a little bit of a setback, but at the same time, we hadn’t put anything in place yet, counting on LNG,” said Germuth.

Everything we’ve been looking at, we said, ‘okay, with or without LNG, how can we make these different projects work,’” he added.

Of course, everybody was waiting for that decision in December, and I would give LNG Canada a lot of credit, as soon as the joint venture partners knew that they weren’t able to make that decision in December, the first thing they did was get ahold of us so… now we all have to adjust accordingly.”

For us, it’s not a matter of if, it’s a matter of when. We fully believe that Kitimat is the absolute best location anywhere on the west coast of BC, if not the west coast of North America to build a major LNG project so we know it’s still going to come, its just a matter of timing,” Germuth went on to say.

Sherrie Little, president and CEO of Kitimat Valley Institute, joined the Kitimat for LNG Facebook group just a few weeks before the announcement came down. She believes that one major employer in the region, such as Rio Tinto, is not enough for residents.

I think organizations and employers within town are going to have to look at alternative ways of finding business for themselves… and figure out who other clients are and what other work we can do, and how we can continue being able to react to when a positive FID is announced, she said.”

(People) are devastated, and I’ll be honest, I was too.”

In a town built around industry, with Rio Tinto (formerly Alcan) and the Eurocan pulp mill being the main employers of Kitimat residents for decades, people here are used to industry being in town, supporting initiatives and organizations. Eurocan closed in 2009, and Rio Tinto’s smelter modernization wrapped up in 2015, and many people left the area after temporary construction jobs, or jobs they had worked at for years were no longer around.

It will be interesting to see how the next few months and years in Kitimat and Kitamaat Village play out, and how people and organizations will adjust and react to the delay.

There’s no doubt that people here want to see something big come through, and they aren’t afraid to stand up and ask for it anymore.