There have been at least 15 proposals to build LNG export terminals in British Columbia. Together, these proposals contemplate building LNG terminals capable of processing in excess of 200 million tons per annum (MTPA). This capacity represents more than 50% of current world-wide LNG capacity and is more than double the capacity of Qatar, currently the global leader in LNG. Obviously, not all of these projects will be completed. Indeed, it is unlikely that anything near this level of capacity will be developed in BC, particularly if current market conditions persist.

However, at least some of these proposed projects are worth closely monitoring. There are three LNG projects - Woodfibre, Douglas Channel and the Petronas - led Pacific Northwest – which are widely reported to be making (or at least aiming to make) a final investment decision (FID) as soon as practicable and, in any event, at some point in 2015.

Pending FIDs

The current best estimates of the path to first gas for the three BC LNG projects where a final investment decision is currently pending are set out below:

Click here to view table.

Source:    Government of British Columbia’s “LNG in BC” website and Company Announcements.

Woodfibre and Douglas Channel are both small-scale LNG export terminals and, compared to the other proposed BC LNG projects, each has relatively modest capital requirements to complete the LNG export terminals themselves: roughly $1.6 billion for Woodfibre and $500 to $600 million for Douglas Channel.

Moreover, neither Woodfibre nor Douglas Channel require major new capital investments to acquire or develop upstream assets such as new gas fields and/or major new pipelines. Gas requirements for these small-scale LNG projects are relatively modest and can be easily satisfied by gas reserves already in place or likely to be readily available in the market-place.  Moreover, Woodfibre is only 100 kilometers or so from an existing Fortis gas pipeline and Douglas Channel will use capacity on the existing AltaGas PNG pipeline to ship any required gas feedstock to its LNG terminal. 

In terms of regulatory approvals, Woodfibre filed an environmental assessment application in early 2015 to start a 180-day review process.  Douglas Channel either holds all, or is exempt from the need to obtain any further, material regulatory approvals.

Douglas Channel’s sponsors, led by AltaGas as project manager, include a variety of participants with key skills and significant industry credibility. Those participants include Idemitsu from Japan, EDF Trading, which provides the project’s LNG off-take, and EXMAR, a global leader in floating LNG production. While the Douglas Channel project is small, it may well be a “proof of concept” for other, more significant LNG projects to come, including Triton LNG, a 2.3 MTPA joint venture between AltaGas and Idemitsu.

Petronas’ Pacific Northwest LNG project is much larger, more complex and more expensive than either Woodfibre or Douglas Channel. Preliminary estimates put the cost of developing the first phase of its LNG export terminal on Lelu Island near Prince Rupert at $11 to $12 billion, but the over-all cost at full build-out, including all upstream gas supply and pipeline costs, could be as much as $36 billion.

Petronas is still in the process of obtaining required regulatory approvals under federal environmental legislation and has run into some additional cost, complexity and delay while it works through issues with regulatory authorities and affected First Nations. Petronas will likely need to make any decision to proceed by the end of 2015 if it is to ship first gas by 2018 or 2019, as currently planned.

Petronas has just recently made significant proposals to affected First Nations - so far without success - and has signed a Project Development Agreement with the BC government regarding the royalty and LNG - specific tax regime applicable to its proposed project. While it remains uncertain whether the Pacific NorthWest project will proceed on schedule, or at all, Petronas has demonstrated a consistent determination to move this project to completion, if at all possible.

Major Projects

The current best estimates for the earliest credible path to first gas for the four large BC LNG projects proposed to be undertaken by major global LNG participants are as follows:

Click here to view table.

Source:    Government of British Columbia’s “LNG in BC” website and Company Announcements.

Shell and Chevron have been cautious about fixing a firm date regarding final decisions to proceed. In April 2014, while unveiling their syndicate arrangements, Shell indicated that any decision to proceed on the LNG Canada project was still at least 18 to 24 months away. Shell also noted at that time that any decision would depend on favorable economic and market conditions.

For its part, Chevron has indicated that it will not make any decision to proceed with the Kitimat LNG project until it has been able to secure gas sale contracts on favorable terms. Chevron has emphasized the achievement of that key milestone, more than any particular date, as a pre-condition for proceeding with the Kitimat LNG project.

While CNOOC and Exxon have both been considering BC LNG projects for some time, each has only recently filed an environmental assessment application. These filings confirm that CNOOC and Exxon will likely not make any decision to proceed for at least several more years and realistically do not expect to ship first gas until sometime well into the next decade.

Over the next year, we should have a better idea of whether an LNG industry will actually develop in BC over the short-term. Over the next several years, we should also have a better idea of whether BC’s LNG industry is likely, at any time in the foreseeable future, to become a truly significant participant in the global LNG trade.