[Premium] BC LNG Still Very Much Alive

LNG prospects for British Columbia are a far cry from the 20 or more projects that were dreamed of by former premier Christy Clark just five years ago as she envisioned a $100bn LNG windfall for Canada’s western-most province, but the industry is still very much alive, the Canada Gas & LNG Conference was told May 14.

Delivering a keynote address to the conference, David Keane, president of the BC LNG Alliance, said his group’s seven members – Anglo-Dutch major Shell’s LNG Canada, ExxonMobil’s WCC LNG, Chevron Canada’s Kitimat LNG (with partner Woodside Energy), Triton LNG (a partnership of Alberta midstreamer AltaGas and Japan’s Indemitsu) and FortisBC (which is a leading developer of small-scale LNG in BC) – are still a force to be reckoned with on the global LNG stage.

“Today we have seven members who are leading players in the Canadian and global energy industry – most of which have significant investments in LNG projects around the world,” he said. “The fact that these members continue to invest and operate in BC is a vote of confidence in Canada and British Columbia and the fundamentals that are at the core of the province’s LNG sector.”

What they may also be eyeing, Keane said, is an emerging supply shortfall that LNG Canada lead Royal Dutch Shell has said will require some C$250bn of investment globally to meet a surge in demand expected between now and 2030.

“Contrary to what you may have read or heard in the media or from various pundits over the past few years, the BC LNG industry is very much alive, and our industry has continued to move forward even as we saw a downturn in global LNG markets and pricing,” he said. “Our members have continued to develop and invest in their projects, and we are hopeful that we will see two final investment decisions later this year.”

In order to get to that FID – LNG Canada is widely expected to reach that stage this year – Canadian LNG projects need a completed FEED phase, which will establish cost certainty, and assurance that the project will remain cost competitive, with a firm fiscal framework in place from all levels of government and ongoing support from First Nations and local communities.

This past March, the BC government of premier John Horgan introduced fiscal certainty at the provincial level by eliminating an LNG income tax that formed the basis of Clark’s $100bn windfall and extending to the LNG industry the same relief from the provincial sales tax that the manufacturing sector already enjoyed.

As well, the province removed a discriminatory electricity tariff that was 40% higher than rates paid by other industries and set new greenhouse gas emission standards.

Essentially, Keane said, the new framework levels the playing field for BC LNG development and removes barriers that would otherwise have prevented BC LNG proponents from competing globally.

“Prior to the government’s announcement, the BC LNG industry had nine different layers of taxes imposed on it – including the LNG income tax, which no other country in the world has. Other countries have between two and four layers of taxes on their LNG industry,” Keane said. “The reality is, LNG is a commodity and buyers are not willing to pay more for LNG from BC. Therefore, the BC LNG industry must be able to produce LNG at a price that is cost competitive with other global jurisdictions.”

Western Canada 'to have world's lowest-emissions LNG'

BC LNG, he added, will not just be cost competitive – it will also be environmentally competitive, and indeed will be the greenest in the world, emitting just 0.16 metric tons of CO2 for every metric ton of LNG produced. Globally, LNG production emits an average of between 0.25 and 0.30 metric tons of CO2 for every metric ton of LNG.

“Producing the world’s cleanest LNG is perhaps the most compelling reason for BC to develop an LNG industry,” Keane said. “If we do not produce LNG in BC, it will be produced in other jurisdictions, like the US, Australia, Africa, the Middle East or Russia, with much higher greenhouse gas emissions.”

And not only will BC LNG be the greenest in the world, it will help the nations it attracts as customers achieve their own climate change goals, Keane noted. Just one large BC LNG project meeting Asian power generating demand, he said, could displace some 53mn metric tons of CO2 each year compared to coal-fired generation, the equivalent of shutting down up to 34 coal-fired power plants in China.

And using BC LNG to heat homes and fuel industrial activities, he said, would result in life cycle carbon dioxide emissions up to 30% less than oil and as much as 50% less than coal for each unit of energy produced.

“If we fail to develop LNG here, it does not prevent or reduce greenhouse gas emissions – it just means those emissions, and more, are moved to other countries,” Keane concluded. “The technology that is developed in BC, as a result of our investment in carbon-reducing technologies, could be transferred around the world, making the carbon-reducing impact of LNG from BC even greater.”

David Keane, president of the BC LNG Alliance, previously held senior roles with BG Canada, Dynegy, Apache, and ConocoPhillips