The $40 billion LNG Canada project could be Canada’s largest infrastructure undertaking if it gets the green light. A flurry of activity in Kitimat real estate suggests that the project is a green light and one analyst in Calgary says a decision on the massive project may come as early as this month. LNG Canada image.
LNG Canada will significantly shorten route from North America to Asia
The northwestern BC city of Kitimat is home to the proposed $40 billion LNG Canada project which had been put on the back burner in recent years by Royal Dutch Shell and its partners, but a forecasted shortfall in natural gas supply has all but brought the project back to life.
Kitimat’s mayor, Phil Germuth told Bloomberg “I would put money on it — it’s going ahead”. Germuth recently hosted a banker from Barclays Bank Plc from the United Kingdom visiting the city to check out the project. In May, the mayor met with officials of the Mitsubishi Corp., one of the projects five partners, who toured the site.
An apartment complex that had been built for Shell executives and sat mostly dark and empty for the past two years now has a full parking lot and the lights are on in the suites. House prices and rent are also rising in anticipation of a flood of workers landing in Kitimat.
As well, Bloomberg reports that workers at the nearby Rio Tinto Plc smelter have left their jobs to join contractors ramping up for the massive LNG project.
Head of the Haisla Nation, Crystal Smith said she recently met with project officials. She said “this meeting was a little different”.
Smith added that there was no agenda. “They just wanted to meet — in the sense that they’re very optimistic we’re going to be together for the next 40, 50 years.”
Should the project go ahead, LNG Canada will eventually ship as much as 20 million tons per year, or about 10 per cent of the 2017 global LNG supply. And the route to Asia will be shorter than from any other North American LNG facility.
The project is particularly important for Canada because energy exports are almost exclusively sold to the United States at a significant discount due to the lack of transportation options.
It also means the massive Montney natural gas formation will be unlocked. The Montney holds about half the total reserves of Qatar, the home of the world’s third largest natural gas reserves.
By threefold, LNG Canada would be the largest single Canadian infrastructure project to date, according to LNG Canada Chief Executive Officer, Andy Calitz.
The partners, Shell, Mitsubishi, Petroliam Nasional Bhd., PetroChina and Korea Gas Corp., are expected to make the final investment decision by the end of the year. Susannah Pierce, LNG Canada spokeswoman says an exact date for the announcement is up to the partners.
But, National Bank of Canada analyst Greg Colman told Bloomberg “the probability is weighted towards a positive decision”. Stream Asset Financial Management of Calgary said the project is “effectively a done deal” and the firm expects a decision on the project earlier than expected.
According to Bloomberg, in a note issued on Monday, the asset manager said a decision on LNG Canada may come as early as this month.
Using Google Earth, Colman says his team spotted old storage tanks being cleared from the site as well as a barge installing piles to expand the current pier. As well, preparatory work for work camps to hold thousands of out-of-town employees is underway.
In recent weeks, LNG Canada and TransCanada, the company building the 670 Kilometre pipeline to the Kitimat terminal from Northeastern BC, have announced contracting companies selected for the project.
While optimism is high, there are some hurdles left to clear.
The federal government has yet to announce if it will grant the multi-billion dollar project an exemption from duties on the complex steel modules required to build the terminal. Currently, no Canadian assembly yard is equipped to tackle the project, according to David Keane, president of the BC LNG Alliance.
Each LNG model can be as tall as a 10-storey building and weigh as much as 10 jumbo jets.
“We are confident in our position that large, complex LNG modules cannot be made in Canada, and therefore should not be subject goods,” LNG Canada’s Pierce said.
According to Bloomberg, local indigenous and municipal officials credit Shell with cultivating on-the-ground support that will help minimize local opposition. The multinational oil company donated a school bus outfitted with seat belts to a high school in Kitimat following the tragic Humboldt Broncos bus crash.
“If there were a blueprint of how to approach any kind of major industrial project, especially in oil and gas, LNG Canada is one to learn from,” says the Haisla Nation’s Smith.
LNG Canada will have the lowest carbon emissions in the world per ton of LNG produced, according to the BC government.