LNG Canada CEO Sees Construction Starting in Kitimat This Year
LNG Canada CEO Andy Calitz promised yesterday that the C$40-billion megaproject will begin construction at its facility in Kitimat, British Columbia by the end of this year, before the company walked back his comments and said a final investment decision (FID) on the project has not yet been made.
Calitz told a conference the project was set back in 2016, when fossil prices were low, but is back on track this year.
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“It didn’t make sense in July 2016,” he said. “When [our stakeholders] asked the inevitable question, when will you reconsider the FID? Our answer was: We will be in construction in 2018. I reaffirm that commitment today.”
While media reported the company’s reaction as a “slight backtrack”, External Relations Director Susannah Price’s statement indicated no immediate change in the project’s status. “LNG Canada is currently preparing to submit a Decision Support Package for review by our Joint Venture Participants (JVPs) later this year,” she said. “However, the exact date for an FID is up to the JVPs to make.”
B.C. Energy Minister Michelle Mungall still declared herself “very encouraged” by Calitz’ comments. “It’s good to see that so many people in B.C., investors as well, are excited to see these types of projects go forward,” she said. “We know the framework was very important to this. We need to make sure that B.C. is competitive.”
One of the key elements of that competitiveness: the “framework” of tax incentives B.C. introduced for the project in late March. Earlier in the year, B.C. Green leader Andrew Weaver threatened to bring down Premier John Horgan’s minority government over its support for LNG Canada, though he later said he would watch for the government to introduce a robust greenhouse gas reduction plan that hit ambitious targets despite increased LNG production—an outcome that at least two analysts consider less and less likely.
Earlier in the Canada Gas & LNG Exhibition and Conference in Vancouver, Mungall was bullish about the potential for LNG exports. “Part of the energy map we are developing involves the natural gas industry and our ability to export LNG to the rest of the world,” she told participants.
The last few days had seen an outbreak of optimism from fossil industry executives that the massive project would receive a final investment decision (FID) from the Royal Dutch Shell-led consortium that is backing it.
“Certainly, the future of natural gas in Canada is LNG,” and “I think we are closer than we have ever been to an LNG project going forward,” said Painted Pony Energy Ltd. CEO Pat Ward. “It’s a very exciting time. I really believe this is going ahead. It looks like it will be this fall sometime—probably September or October is what we think.”
“We’d love that project to FID,” said Tourmaline Oil CEO Mike Rose. “Intuitively, if one project goes ahead we think it’ll be followed by others, and we kind of think that’s how Canada should view its LNG business.”
At a fossil investment forum in Calgary last week, Shell Canada President Mike Crothers said he was “cautiously optimistic” about the project, noting that the LNG Canada consortium—which also includes Mitsubishi Corporation, PetroChina, and Korea Gas Corporation (KOGAS)—had recently awarded a $14-billion design-build contract for its Kitimat facility to Japan’s JGC Corporation and U.S.-based Fluor Corporation.
“We’re getting cost estimates finalized [and working] on the economics,” Crothers said. “We don’t have a definitive timeline for FID,” but “we’re working through and managing these issues and making the project all the more affordable and competitive as we go.”
He didn’t elaborate, and Business in Vancouver says it wasn’t clear whether his remarks indicated a delay in investors’ decision on the project, which was expected this year.
Crothers added that LNG market analysts were surprised when natural gas prices in Asia bounced back faster than expected. “I don’t think people understand how resilient the LNG demand actually is, probably because the demand isn’t as transparent as the supply picture,” he said.