Canada extends Pacific NorthWest license to 40 years

OREANDA-NEWS. October 17, 2016. Canada's National Energy Board (NEB) today extended the duration of the export license for the Pacific NorthWest LNG project to 40 years from 25 years.

The Canadian Environmental Assessment Agency on 28 September approved construction of the proposed project on Lelu Island, British Columbia (BC), but it is unclear if it will be built because of low oil prices and competition from cheaper US projects. Exports from Pacific NorthWest would likely be indexed to oil prices.

Dozens of LNG export projects have been proposed in Canada, but none has made a positive final investment decision (FID), while some have been delayed or scrapped. The BC government supports LNG projects in an effort to create jobs, and it hopes Pacific NorthWest will be the first to make an FID.

The NEB in December 2013 authorized the project to export for up to 25 years up to 22.63mn t/yr, equivalent to 3.15 Bcf/d (89mn m?/d) of gas. But after that approval Canada extended the maximum duration of LNG export licenses to 40 years, in an effort to entice developers to build multi-billion-dollar projects. Projects that had already received 25-year authorizations were allowed to seek extensions, and Pacific NorthWest applied in February for an extension. The license would begin when exports start.

Pacific NorthWest has an estimated cost of \\$36bn, but that includes \\$5.9bn the project partners previously spent to acquire Canadian upstream company Progress Energy, which owns gas assets in the western Canadian sedimentary basin that would provide gas for liquefaction.

The first-phase of the export terminal has an estimated cost of \\$9bn for capacity of 13.1mn t/yr. Additional costs include \\$6.7bn for pipelines and up to \\$14bn for upstream development.

Malaysia's state-owned Petronas, which is spearheading the project, said in August that it plans to conduct a "total review" before making and FID. Petronas and its partners reached what they called a "conditional FID" in June 2015, saying they were satisfied with the project's economics despite falling oil prices. Exports were scheduled to start in 2020 if an FID had been reached early this year.

Petronas has a 62pc stake in the project. China's state-controlled Sinopec holds 15pc, Japanese upstream firm Japex and India's state-controlled oil IOC own 10pc each and state-owned Petroleum Brunei has 3pc.