Woodfibre announces major supply agreement with Chinese gas company

A rendering of the proposed Woodfibre LNG plant

Woodfibre LNG has its first potential customer, and it is a major player in China.

The company announced Monday its Singapore-based affiliate Woodfibre LNG Export Pte has signed an agreement with Guangzhou Gas Group Co. to deliver liquefied natural gas to the Chinese gas company for 25 years starting in 2020.

The announcement coincided with a trade mission involving more than 200 government and business representatives from China, who visited Vancouver May 8 and 9.

“The LNG offtake contemplated in the Heads of Agreement will provide a long-term stable supply of natural gas to meet the rapidly growing demand for clean energy in Guangzhou City, People’s Republic of China,” a Woodfibre LNG news release states.

Guangzhou Gas Group Co. is the public gas utility for Guangzhou City, which has a population of more than eight million and is Vancouver’s sister city.

Premier Christy Clark was on hand for the official signing of the agreement.

The sale represents half of Woodfibre LNG’s potential liquefied natural gas capacity. The facility is slated to produce 2.1 million tonnes of liquefied natural gas per year, and Guangzhou will purchase about one million tonnes, according to Byng Giraud, Woodfibre LNG vice-president of corporate affairs.

My Sea to Sky spokesperson Eoin Finn stressed the agreement is not binding.

“As is commonly understood about heads of agreement documents, this announcement falls far short of a binding contract,” Finn told The Squamish Chief in an email.

“Typically, before any capital funding can be loaned for an LNG contract, binding agreements must be in place for 70 per cent-plus of the production volume over the life of the plant.  That is clearly not the case here. Neither party is legally bound by this.”

Finn also said the LNG announcement was timed – perhaps not coincidentally – one year from the 2017 provincial election, “when the government will have to explain the progress made on 2013 promises.”Giraud said the new announcement is a preliminary agreement  but is good news for the project.

“This is a fairly big deal for us,” he said. “It certainly accelerates the project.”

The agreement also states the Chinese company has the option for 10 per cent equity in Woodfibre LNG, Giraud said, “so they would invest in the project as well as be a customer, which is not unusual.”

A final investment decision by Woodfibre LNG has yet to be announced, however, Giraud said the export facility is expected to be operational in 2020. The company had originally anticipated being operational in 2017.

“We were a little slower on the environmental assessment [process] than we wanted to be. We still have some permitting to do,” he said. “This is a more realistic date.”

Giraud said a final investment decision is expected this year.

The agreement with Guangzhou Gas Group “shows there is an appetite in Asia for made-in-B.C. LNG,” said Giraud. “This preliminary agreement gets us one step closer to making the Woodfibre LNG project a reality, and bringing much-needed jobs and other economic benefits to Squamish and the surrounding area.”

Woodfibre LNG Export and Guangzhou Gas Group signed a Memorandum of Understanding outlining the potential for an agreement in September of 2014.

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