The first shipment from LNG Canada’s terminal in Kitimat, B.C., is slated to set sail to Asia within weeks.Aaron Whitfield/The Globe and Mail
Petronas Energy Canada Ltd.’s chief executive officer is optimistic about LNG Canada’s expansion plans in British Columbia for exporting liquefied natural gas while wary of looming competition from Alaska.
LNG Canada’s two largest co-owners are London-based Shell PLC at 40 per cent and Malaysia’s state-owned Petroliam Nasional Berhad, better known as Petronas, at 25 per cent.
“We want more LNG. We’re very, very supportive of advancing LNG off the West Coast,” Petronas CEO Mark Fitzgerald said in an interview. “But it has to be competitive around the globe, certainly in terms of cost of supply and infrastructure.”
Through a wholly owned subsidiary, Kuala Lumpur-based Petronas owns Petronas Energy Canada, which oversees natural-gas assets in the North Montney region of northeast B.C.
The first shipment from LNG Canada’s terminal in Kitimat, B.C., is slated to set sail to Asia within weeks.
LNG Canada’s five co-owners are considering Phase 2, subject to scrutiny of factors such as emissions caps envisaged by the federal and B.C. governments.
As the U.S. trade war escalates, LNG Canada is poised to start exports to Asia
“Let’s not apologize. Let’s take advantage of what our strengths are, without penalizing the industry,” Mr. Fitzgerald said, adding that no deadline has been set for a final investment decision on whether to expand.
LNG Canada is aiming to perform better than the B.C. government’s environmental standard for carbon-dioxide emissions intensity, relying on natural gas-fired turbines at high efficiency to help supercool natural gas into liquid form.
Canada has lagged far behind the United States over the past decade when it comes to seizing opportunities for LNG exports.
Petronas Energy Canada's CEO Mark Fitzgerald.DARRYL DYCK/The Globe and Mail
“There is a lesson that we learned the hard way in Canada. We had so many proposals,” Mr. Fitzgerald said. “We were going to be the leader in global LNG, but we never got them across the finish line and the U.S. did.”
U.S. President Donald Trump has been touting Alaska LNG as a promising venture to reach Asian markets.
Despite the high costs that would be required to build Alaska LNG, the early-stage proposal is “very much real competition” against LNG Canada’s Phase 2, Mr. Fitzgerald said.
The first LNG export facility in the lower 48 states began operating in 2016 and another seven U.S. sites have opened since then.
LNG Canada will become the country’s first export terminal for the fuel, with an initial capacity of 14 million tonnes a year. Phase 2 expansion plans would double the export capacity of the Kitimat project, which is located on the Haisla Nation’s traditional territory.
Prime Minister Mark Carney has emphasized that he wants to make Canada an energy superpower globally, aiming to fast-track conventional energy production while also spurring the transition to renewables.
But LNG Canada already has environmental approvals from B.C. and federal regulators – with Phase 2 being in a much more advanced stage of planning than the much-delayed Alaska LNG proposal.
Why Canadian energy is a secret bargain
LNG Canada CEO Chris Cooper said there will be a methodical approach to assessing expansion prospects, including factors such as Phase 2’s affordability and competitiveness. “You try and solve this complex Rubik’s Cube of an investment,” he said during a recent tour of the Kitimat terminal.
The contentious Coastal GasLink pipeline will supply natural gas from northeast B.C. to LNG Canada’s $18-billion Phase 1 facility.
It cost $14.5-billion to construct the 670-kilometre pipeline, and industry experts say it could cost billions of dollars more to add six compressor stations to double capacity along the existing pipeline.
TC Energy Corp., which owns 35 per cent of Coastal GasLink, is the pipeline’s operator. “No pipeline twinning is required,” TC Energy CEO François Poirier said in a statement to The Globe and Mail. “We continue to progress development work as requested by our customer LNG Canada to support their assessment of a potential Phase 2 expansion.”
During a recent speech to the Greater Vancouver Board of Trade, Mr. Poirier said Canada has an opportunity to strengthen its economic sovereignty, notably by bolstering LNG exports to Asia. He said LNG could help “build our national, local and Indigenous economies.”
As the U.S. trade war persists, Canada’s nascent LNG industry is looking to buyers in Asia to help reduce economic dependence on the United States.
However, climate activists say the benefits of LNG have been greatly exaggerated, when the focus should be on renewable energy instead of perpetuating production of fossil fuels.
Political support for LNG gaining traction in Canada, Indigenous leader says
Only three LNG projects are under construction in B.C., despite energy companies unveiling more than 20 proposals in the province from 2011 to 2015.
Those three B.C. projects are anticipating exports within the next 43 months: LNG Canada by mid-2025; Woodfibre LNG by late 2027; and Cedar LNG by late 2028.
Two prospects are Ksi Lisims LNG, backed by the Nisga’a Nation in Northern B.C., and FortisBC’s plans to expand its Tilbury Island domestic plant in Delta, near Vancouver.
Most plans to export LNG from Canada’s East Coast have fizzled.
Shell has the largest stake in LNG Canada at 40 per cent, followed by Petronas (25 per cent), PetroChina (15 per cent), Japan’s Mitsubishi Corp. (15 per cent) and South Korea’s Kogas (5 per cent).
Bloomberg News reported on Tuesday that Kuala Lumpur-based Petronas is pondering options for divesting some or all of its natural gas operations in northeast B.C.
The Malaysian company holds its stake in LNG Canada through a separate wholly owned entity, North Montney LNG Limited Partnership.
Petronas issued a statement on Tuesday to say that it is committed to its Canadian investments, including the North Montney assets and Kitimat terminal. “With LNG Canada preparing for its first cargo this year, Petronas is proud to be providing lower carbon, reliable Canadian liquefied natural gas to support global energy markets for decades to come.”