Canada takes global centre stage with LNG plans

Natural gas is enjoying a renaissance around the world and Canada is taking centre stage to supply Asian countries with cleaner-burning fuel, says a new report.

Consumption and production of natural gas was up over five percent in 2018, one of the strongest rates of growth for both demand and output for over 30 years.

While natural gas demand in the past was driven by power generation — displacing more carbon-intensive energy sources such as coal and oil — in the future, the demand will come from industrial applications and petrochemicals said the report entitled LNG: Canada’s Global Market Opportunity.

LNG developers in Western Canada have many advantages, including access to large and low-cost gas supplies, as well as faster access to Asian markets than U.S. Gulf Coast LNG plants.

There is also the potential to produce LNG with the lowest GHG emissions in the world, especially in British Columbia, where most of the province’s power is generated by hydropower.

“For Canada’s West Coast projects, all eyes are on the Asia Pacific region. It is home to the world’s three largest LNG consumers in China, Japan, and South Korea. Canada, due to proximity, is potentially a key exporter for these nations thanks to low transportation costs compared to competing regions from further afield,” says Mark Young, a senior oil and gas analyst with Evaluate Energy.

Asia will remain the dominant market for LNG imports, although the pattern of imports within Asia shifts, with China and India overtaking the more established markets of Japan and Korea, and accounting for around half of all LNG imports by 2040.

Alberta and British Columbia fields have generations’ worth of abundant natural gas as well as faster access to Asian and other markets than U.S. Gulf Coast LNG plants, said the report.

But Canada must also address current disadvantages — in particular, regulatory issues and the lack of certainty in the overall investment climate for energy projects in the country, the report concluded.

Canada is the world’s fifth-largest producer of natural gas, with an estimated 1,225 trillion cubic feet (tcf) of remaining natural gas resources.

 

KEY CANADIAN LNG PROJECTS IN BRITISH COLUMBIA

 

1. LNG Canada

• Location: Kitimat, B.C.

• Proponents: A joint venture comprised of Royal Dutch Shell plc, through its affiliate Shell Canada Energy (40%); PETRONAS, through its wholly-owned entity, North Montney LNG Limited Partnership (25%); PetroChina Company Limited, through its subsidiary PetroChina Canada Ltd. (15%); Mitsubishi Corporation, through its subsidiary Diamond LNG Canada Partnership (15%); and Korea Gas Corporation, through its wholly-owned subsidiary Kogas Canada LNG Ltd (5%).

• Capacity: The project will initially export 14 mtpa, the equivalent of about 1.8 bcf/d, from two processing units. At full build-out, LNG Canada will have four trains or processing units, each with the capacity to process approximately 7 mtpa of LNG for export to countries in Asia and elsewhere.

• FID: A final investment decision was made for the first two trains on Oct. 1, 2018.

• Anticipated onstream date: 2025.

• Associated infrastructure: TC Energy will build, own and operate the 670-kilometer Coastal GasLink (CGL) pipeline that will connect natural gas from northeast B.C. to the export plant.

• Regional economic benefits: 4,500 people employed at peak construction on the Kitimat site.

• Recent announcements: In June 2019, the federal government said it will spend $220 million to help fund energy-efficient gas turbines and another $55 million to replace a bridge for the project.

In April 2019, the LNG Canada project owners officially handed over construction management to their prime contractor, JGC Fluor.

In January 2019, LNG Canada approved $937 million in contracts and subcontracts to First Nations and Canadian businesses.

 

2. Kitimat LNG

• Location: Bish Cove, near Kitimat, B.C.

• Proponents: The proposed project is a 50/50 joint venture between Chevron Canada Limited and Woodside Energy International (Canada) Limited.

• Capacity: The Kitimat LNG plant includes up to three LNG trains totalling 18 mtpa (6.0 mtpa/train).

The initial foundation project consists of two trains (12 mtpa).

• Anticipated FID: 2022 to 2023.

• Construction of Phase 1: 2022/23 to 2028/29; commissioning of first LNG train begins after construction is complete; commissioning of second LNG train begins three weeks after the commissioning of the first train; construction and commissioning of the third LNG train as market conditions allow.

• Associated infrastructure: The 471-kilometre Pacific Trail Pipeline (PTP).

• Regional economic benefits: At peak construction of the LNG facility, it is estimated that more than 3,000 people would be working on the Kitimat LNG plant site with another 1,500 workers building PTP. In addition, Kitimat LNG has a benefits agreement with the Haisla Nation for the plant, which is located on Haisla Nation Reserve land, and an agreement with all 16 First Nations along the proposed PTP route through the First Nations Limited Partnership (FNLP).

• Recent announcements: In July 2019, in an NEB filing, the proponents said supply will come from the equity gas resources of Chevron and Woodside held together in the Liard Basin, Chevron’s equity gas resource in the Kaybob Duvernay resource and, if needed, from other contingent and prospective resources, and open market purchase or swaps made in WCSB market hubs.

In July 2019, the project proposed to become an all-electric plant that will be powered by hydroelectricity from BC Hydro. In July, the proponents also proposed a third train for the project.

 

3. Woodfibre LNG

• Location: Squamish, B.C.

• Proponents: Woodfibre LNG Limited is a subsidiary of Pacific Oil & Gas Limited (PO&G), part of the Singaporean conglomerate RGE.

• Capacity: The project is licensed to export about 2.1 mtpa for 40 years.

• Anticipated FIB: Summer 2019.

• Anticipated onstream date: 2023.

• Associated infrastructure: The project will receive natural gas from the Eagle Mountain – Woodfibre Gas Pipeline (EGP) Project.

• Regional economic benefits: 650+ jobs at peak construction; 100+ jobs at Woodfibre site;

1,410+ additional indirect or induced jobs during construction or at the site thereafter.

• Recent announcements: In July 2019, the BC Oil and Gas Commission (OGC) approved Woodfibre LNG’s permit for its export facility.

In June 2019, Woodfibre said that BP Gas Marketing Limited had agreed to buy 0.75 mtpa of LNG for 15 years starting in 2023.

In May 2019, PO&G said it is acquiring all of the issued and outstanding shares of privately-held Canbriam Energy Inc. and its Montney assets.

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