LNG Canada aims for construction start this year

LNG Canada CEO Andy Calitz said the company's multi-billion dollar liquefied natural gas project in Kitimat has been delayed but not cancelled |Chung Chow

In 2016, when LNG Canada hit the pause button on its multi-billion dollar liquefied natural gas project in Kitimat, CEO Andy Calitz made it clear the project was “delayed not cancelled.”

“The project in Canada is FID ready and has not been cancelled,” Calitz said in 2016.

At a Globe conference forum on energy transition March 14, Calitz confirmed the company plans to seek a final investment decision from the main partners, which includes Royal Dutch Shell, this year.

Despite skepticism that a large LNG project will ever be built in B.C., both Calitz and Shell senior executives have been telegraphing their intent to move ahead with LNG Canada project for months now, and have said they expect to make a final investment decision in 2018.

Calitz went a bit further Wednesday March 14, saying the goal was to start construction this year.

“When we paused LNG Canada in 2016, when oil prices were $35 and there was no market for LNG in Asia, at the time we said we wanted to be in construction in 2018,” Calitz said, in answer to a question about the timing of a final investment decision.

“My answer remains unchanged,” he said, adding LNG Canada is preparing final investment documents for approval of the stakeholders.

Those stakeholders include Shell, and three of Asia’s biggest companies: PetroChina, Kogas and Mitsubishi.

LNG Canada originally had planned to make a final investment decision in 2016. The project has all of its environmental approvals in place, as well as agreements with First Nations.

While he conceded there are significant challenges to building a new LNG project of the size LNG Canada has in mind – not the least of which is building a new gas pipeline across a mountain range – Calitz also said there are some distinct advantages, one of them being short shipping distanced to Asia.

Asked why he is so optimistic that the LNG Canada project will go forward, Calitz said the company's Asia partners are keen to see the project built.

“I’m hopeful because of the incredible conviction of PetroChina, Kogas and Mitsubishi to do this project," he said.

The LNG Canada project has been roughly estimated to have an all-in capital cost of $40 billion, although LNG Canada has never put a firm number to the project. That includes the LNG plant itself, a new pipeline and upstream natural gas assets.

“LNG Canada will be the largest infrastructure project ever launched in this country, and there is no shortage of funding for it for the so many reasons that it makes sense,” Calitz said at last week’s energy transition forum.

One of the hurdles the company still faces is at the federal level. Last year, Canada slapped 45% duties on fabricated steel imports from China, South Korea and Spain.

Since the large LNG modules that are needed cannot be built in Canada, LNG Canada would need to bring them in from Asia. Unless the project gets an exemption from the federal government, the duties would add significant costs to the project.

LNG Canada has applied applied to the federal minister of Finance for a remission order setting aside the duties for its project.

Phil Germuth, mayor of the District of Kitimat, said he and other mayors in the region plan to travel to Ottawa next week to lobby on LNG Canada's behalf to get an exemption from the tariffs.