Canadian LNG poised to join global stage

There is a strong business case for Canada to join the global LNG market as demonstrated by Canada’s largest LNG export terminal, LNG Canada, nearing completion.

Learn more about Canada’s LNG investments at LNG2023 in Vancouver, where the country’s LNG leaders will participate in the conference sessions and be present in the large exhibition.

DALE LUNAN

In the summer of 2022, German Chancellor Olaf Scholz visited Canada, pointing to Canada’s vast natural gas reserves and urging the Federal Government to support LNG export projects to contribute to Germany’s future energy needs.

After meeting with Canadian Prime Minister Justin Trudeau, the two leaders signed a Joint Declaration of Intent, committing the two countries to collaborate in the export of clean Canadian hydrogen to Germany. In turn, later in November, QatarEnergy and ConocoPhillips signed a 15-year agreement to supply LNG to Germany.

While developing LNG on Canada’s east coast – days closer to Europe than any US Gulf Coast export terminal – remains a challenge, LNG on Canada’s west coast remains vibrant, with the 14 MTPA LNG Canada project now more than 80% complete and three smaller projects with support from First Nations at varying stages of postor pre-FID development.

The LNG Canada project CEO, Jason Klein, will sit down with Canadian Gas Association (CGA) CEO Timothy Egan in a leadership dialogue session on the first day of LNG2023 to discuss the project’s progress, which is set to deliver its first cargoes in 2025. Klein will also provide insight to the project’s key successes and its contribution to global energy security and emissions reductions.

A spokesman for LNG Canada tells Global Voice of Gas (GVG) 196 of 215 modules for phase one of the project have been received, including gas processing units and certain buildings and substations. Nine modules are en route to the LNG Canada site on the shores of the Douglas Channel near Kitimat, BC, while another ten are being prepared for ocean transport.

All large modules from the Qingdao fabrication yard have been received, with the project’s final 19 modules to come from the Zhuhai fabrication yard in China.

LNG Canada and the three other projects, through operational and process innovations and access to renewable electricity from the BC Hydro grid system, will produce LNG with the lowest carbon emissions profile, setting a new global LNG emissions standard.

Woodfibre LNG

The 2.1 MTPA Woodfibre LNG facility at Swiy’at, near Squamish, north of Vancouver, is expected to begin construction in September. Liquefaction facilities will be shore-based, with 250,000 cubic metres of floating storage on two converted LNG carriers and a floating workforce accommodation facility.

In March, Woodfibre LNG announced a “tangible plan” to be net-zero by the time it makes its first exports in 2027. This fast-tracked timeline exceeds the federal requirement to be net zero by 2050, while providing benefits to local First Nations, British Columbians, and Canadians.

Woodfibre LNG’s Roadmap to Net Zero also follows the Province of British Columbia government’s announcement of a new Energy Action Framework, which requires proposed LNG facilities in or entering the environmental assessment process to develop and submit a credible plan to be net zero by 2030.

That roadmap will build on the already low emissions profile of the project, which will use electric compressors in the liquefaction process and incorporate offsets drawn from two nearby nature-based offset projects.

“This roadmap will see Woodfibre LNG be the first LNG export facility in the world to achieve net-zero and includes commitments to be net-zero both through the construction stage of the project and during operations,” Woodfibre LNG said.

Woodfibre, owned 70% by Singapore’s RGE Group through its Pacific Energy subsidiary and 30% by Canadian midstream infrastructure company Enbridge, also has significant First Nation support, and is the first major industrial project in Canada to receive environmental approval from an indigenous group. The Squamish First Nation, on whose traditional territory the project will be built, performed its own environmental assessment, alongside a joint federal-provincial review, and issued an environmental certificate in 2018.

That First Nation support, CEO Christine Kennedy tells GVG, is critical to the success of any Canadian LNG project.

“Recent circumstances around the world have highlighted energy vulnerability for our trading partners,” she says. “it is up to all of us to show genuine, meaningful partnerships with the indigenous government whose territory we work in and to show how we can do projects like this in the context of current government policy aspirations – how we minimise carbon emissions, how we ensure that issues and concerns are addressed.”

Woodfibre’s modules are being built in a Chinese fabrication yard owned by McDermott International, its main contractor, Pacific Energy executive vice president Ron Bailey tells GVG. The project has five major modules and some smaller ones, he says, and all the parts will be pre-tested in China before being shipped to the project site in Howe Sound.

“We’ll be doing much of the pre-conditioning in China,” he says. “Our site is quite challenging from a space standpoint, and we want to get as much done before we bring modules to site.”

Woodfibre LNG also has a significant volume – 70% – of its offtake secured under a pair of binding sale and purchase agreements with BP, Bailey says, with a third SPA being negotiated to cover a portion of the remaining 30%.

“We’re looking to get as much as we can out of this plant,” he says. “You never contract fully because you don’t want to be over contracted, so there will be some spot volumes and we’ll look to see where those can land.”

Cedar LNG

A short distance up the Douglas Channel from LNG Canada is the site of the 3 MTPA Cedar LNG project, the first LNG facility in the world with a significant First Nation ownership position. Haisla Nation, on whose traditional territory both LNG Canada and Cedar LNG are located, owns 50% of the project, in partnership with Pembina Pipeline, a major Canadian energy infrastructure company.

Federal and provincial environmental approvals for the project were received in mid-March, and a final investment decision (FID) on the C$3bn project is expected by the end of Q3 2023, Stu Taylor, senior vice president, marketing and new ventures for Pembina Pipeline tells GVG

“We’ve got a lot of work – we have the regulatory side, we have our commercial side, we have our engineering side and we have our finance path,” he says. “As things go, we’ve got a lot of work to do in a short period of time, but we remain optimistic of that Q3 FID.”

Taylor says Cedar LNG is “really close” to announcing preliminary offtake agreements, but in the meantime has executed a memorandum of understanding with Montney producer ARC Resources for a 20-year liquefaction services agreement for about 200 mmcfpd of natural gas, or about 1.5 MTPA of LNG.

“ARC’s asset quality, leading ESG performance and financial strength, are important attributes in an LNG partner and will help drive our project forward,” Cedar LNG CEO Doug Arnell says.

Like Woodfibre, Cedar LNG will be powered off the BC grid, but unlike Woodfibre, Cedar will be a floating LNG facility, with a single vessel supporting both liquefaction facilities and up to 250,000 cubic metres of LNG storage.

Feed gas will be supplied to Cedar LNG through an 8.5 km pipeline connecting to the CGL pipeline near the LNG Canada terminal. First permits from the BC Energy Regulator have been received for the pipeline, which will deliver about 400 mmcfpd of natural gas to Cedar LNG.

Ksi Lisims LNG

About 140 air km north of Kitimat lies Pearse Island, and on the northern tip of that island, not too far from the BCAlaska border, is where the Nisga’a Nation, Rockies LNG Partners and Houston-based Western LNG want to build the 12 MTPA Ksi Lisims floating LNG project.

Ksi Lisims LNG received a 40-year natural gas export licence from the Canada Energy Regulator (CER) in December 2022, providing for maximum annual exports of 22.4 bcm and term exports of nearly 780 bcm.

The project proponents filed their initial project description with the BC Environmental Assessment Office (EAO) and the Impact Assessment Agency of Canada (IAAC) in the summer of 2021. Under a substitution process, the EAO will conduct the environmental review of the project on behalf of the federal government, beginning with the preparation of an environmental assessment. That process is just getting underway, and a decision on an environmental assessment certificate is not likely until 2024 at the earliest.

Ksi Lisims LNG will be powered by electricity, making it one of the lowest emitting, large scale LNG production facilities in the world, Western LNG CEO Davis Thames tells GVG. It also has ambitious net-zero plans.

“Through the development of nature-based offsets, the project is working to become net-zero, and we’re aiming to achieve that milestone a full two decades before the federal government’s 2050 target,” he says. “Our work with government on electrical transmission improvements also stands to hugely benefit clean energy development in northwest BC.”

The Nisga’a Nation is one of only a handful of BC First Nations with a modern treaty with the provincial and federal governments, and as such is self-governed, which provides for a “uniquely collaborative” approach to industrial developments, Thames says.

“Together, we’ve created an exciting partnership that adds tremendous strength, certainty, and expertise to our project,” he says. “It’s an innovative governance model that stems from our core belief that everyone should have the opportunity to improve their lives, and our partnership does that by providing clean, secure, stable, and responsible energy to global markets while planting a seed of prosperity for the Nisga’a Nation and indigenous people of Canada’s northwest.”

For Rockies LNG, a consortium of six western Canadian natural gas producers together producing about 3 bcfpd, or 20% of total Canadian production, Ksi Lisim LNG represents an opportunity to diversify away from traditional North America markets in favour of more lucrative markets in Asia, which are out of reach of most Canadian producers without access to liquefaction and export facilities, CEO Charlotte Raggett tells GVG

“The Montney and Duvernay formations are the main source of the natural gas that the Rockies LNG partners plan to export through the new Canadian west coast LNG terminal,” she says. “These are prolific fields, but their distance from the main gas-consuming regions of North America means that the product often sells at a discount – receiving full value for the produced resources matters to all Canadians.”

Another key benefit, Raggett says, is the opportunity to contribute to the global climate change solutions. Drawing on technological innovation, higher efficiency and Canada’s strict regulatory limits o fugitive emissions and flaring, Canadian natural gas is less carbon-intensive than gas from most other producing regions, she says.

“Pairing this with a net-zero liquefaction facility means that exporting LNG from Canada can significantly reduce global greenhouse gas emissions by displacing higher emitting fuels, or LNG from more carbonintensive supply regions,” she says. “Northern BC’s relative proximity to Asian markets, when compared with the US Gulf Coast, also reduces transportation costs, energy consumption and shipping emissions.”

The environmental benefits that all three of these Canadian LNG projects will bring to the world are confirmed by a Wood Mackenzie report in November 2022 which showed that Canadian LNG exported to northeast Asia to displace coal use would reduce emissions by about 188 MTPA of CO2, or about 29% of Canada’s annual emissions.

That’s enough of a business case, the consultancy says, to leave the door open for even more Canadian LNG to Asia.

“There are still promises for Canadian projects, especially with the changing global market dynamics,” says Dulles Wang, director of Wood Mackenzie’s Americas gas and LNG research team. “From the west coast, the shorter shipping time to Asia compared to the US Gulf Coast offers logistical, economic and emissions advantages.”