BC expects first LNG FID in early 2016

OREANDA-NEWS. October 15, 2015. British Columbia (BC) expects Pacific NorthWest LNG to become the first Canadian LNG export to make a final investment decision (FID) in early 2016, a top provincial official told Argus today.

The decision would come about 75-80 days after the federal election on 19 October, BC deputy premier and minister of natural gas development Rich Coleman said on the sidelines of the International LNG in BC Conference in Vancouver.

"I spoke to [Pacific NorthWest] last week," Coleman said. "Nothing has changed."

Despite falling oil prices, the \\$36bn export project on Lelu Island, BC, in June made what it called a conditional FID, saying it was satisfied with the economics of the project. It said it would finalize the decision after the BC government approves a project development agreement and the federal government issues final environmental approval. Exports would likely start in 2020.

The BC government approved a project development agreement in July that included a long-term royalty rate, an LNG income tax, a natural gas tax credit, a carbon tax and a greenhouse gas emissions regulatory framework.

The federal government has delayed consideration of the environmental permit because of the federal election. It cannot issue the approval until at least 30 days after the election and after a decision a 45-day comment period must be held before it is finalized, Coleman said.

"Likely it will be about 75 to 80 days after the election," Coleman said, adding that Pacific NorthWest has indicated it will make an FID shortly after that.

Potential obstacles to environmental approval are the ancestral and territorial claims of First Nations groups are part of the evaluation process. In May, the Lax Kw'alaams Band First Nations Group in BC rejected a package worth about C\\$1.15bn (\\$883mn) from Pacific NorthWest, saying it was concerned about potential environmental damage to the Skeena river estuary, a habitat for salmon.

Pacific NorthWest chief executive Michael Culbert told the conference that the Lax Kw'alaams vote and the upcoming federal election "both add uncertainty to the situation – they are not aspects we can control. But what we can do is talk to proponents both before and after the election. That is where we can look for support."

If the project gets environmental approval, "We're shovel ready. We're ready to go," he added.

Malaysia's state-owned Petronas is spearheading the project with a 62pc stake, with China's Sinopec holding 15pc, Japan's Japex 10pc, Indian Oil Corporation 10pc and Petroleum Brunei 3pc. Each partner would have offtake rights corresponding to its equity share and be responsible for securing its own feed gas. Each partner could also buy additional LNG from Petronas.

The proposed Pacific NorthWest terminal has an estimated cost of \\$10bn for the first two liquefaction trains, which would have combined baseload capacity of 13.1mn t/yr, equivalent to 1.85 Bcf/d (52mn m?/d) of gas, and associated facilities. The 466-mile (750km) Prince Rupert Gas Transmission pipeline that would bring feed gas from the western Canadian sedimentary basin has an estimated cost of \\$5bn. Upstream development is estimated to cost another \\$14bn. The pipeline would be built, owned and operated by midstream company TransCanada.