Canada gives one-year extension to LNG-linked pipeline

OREANDA-NEWS. September 19, 2016. Canada has given TransCanada an extra year to decide whether to build a pipeline expansion that would move shale gas to the planned Pacific NorthWest LNG export terminal in British Columbia (BC) and the regional grid.

The National Energy Board (NEB) granted the extension because of delays to the \\$36bn Pacific NorthWest project, which would be the main customer for the planned expansion. TransCanada now has until 10 June 2017 to decide whether to build the \\$1.7bn North Montney Pipeline project. NEB approved the project in April 2015 with a number of conditions, including a 10 June 2016 deadline to start construction.

TransCanada subsidiary NOVA Gas Transmission asked for the extension on 28 March, saying it could not commit the funds to build the expansion before it knows whether the LNG project will move forward.

NOVA owns the 14,600-mile (23,500km) NGTL pipeline system that gathers gas in the western Canadian sedimentary basin for delivery to markets in Alberta and the US.

The North Montney project would expand NGTL with a 2.4 Bcf/d (68mn m?/d), 187-mile (301km) segment extending from the northern area of the Montney shale in northeastern BC southward to the northern end of the existing Groundbirch Mainline, about 22 miles northwest of Fort St John, eastern BC.

TransCanada's proposed \\$5bn, 600-mile Prince Rupert Gas Transmission pipeline would connect with the North Montney expansion and run westward across mountainous terrain to the planned Pacific NorthWest terminal on Lelu Island, BC, along the Pacific coast.

The North Montney expansion would have capacity of 2.4 Bcf/d (68mn m?/d). Canadian producer Progress Energy, which in 2013 was acquired by Malaysia's state-owned energy company Petronas to provide shale gas for LNG exports, has contracted for 2-2.1 Bcf/d of the North Montney capacity. Petronas spearheads the Pacific NorthWest consortium with a 62pc share.

The capacity contract for either pipeline would not be finalized without a positive FID on the Pacific NorthWest project.

After a series of delays, the Canadian federal government is expected to decide in early autumn whether to grant environmental approval to Pacific NorthWest.

Petronas and its partners in June 2015 made what they called a "conditional FID" for Pacific NorthWest saying they were satisfied with the project's economics despite falling oil prices. At the time, exports were scheduled to start in 2020 if an FID was reached early this year. The project would have initial capacity of 13.1mn t/yr, equivalent to 1.85 Bcf/d (52mn m?/d) of gas.

However, Pacific NorthWest may not move forward even if it gets approval from the Canadian Environmental Assessment Agency. Petronas said last month that it will "need to conduct a total review" of the project before it proposes making a positive FID to its partners.