LNG Canada sets example, says First Nations leader

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Nelson Bennett, Resources Reporter, Business in Vancouver
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Getting a multibillion-dollar liquefied natural gas (LNG) project built in Canada is no cakewalk.

Just ask Petronas, which abandoned its plans for a $36 billion LNG plant and associated pipeline in Prince Rupert in 2017.

After Petronas bailed, the prospect of a B.C. LNG industry seemed to evaporate, as it and other projects missed critical contract windows and then got hit by a major plunge in oil and LNG prices.

Then, last year, Royal Dutch Shell and its partners – which now include Petronas – sanctioned their $40 billion LNG Canada project, which is now in the early construction phase.

So how did they do it? How did Shell and Coastal GasLink manage to get their projects to the starting line, after more than a dozen other proposals fell by the wayside?

Answering that question was one of the themes at last week’s annual Canada Gas and LNG Exhibition and Conference, along with: “What are the prospects of two other major Canadian LNG projects – one for the West Coast and one for the East Coast – of getting to the critical final investment decision stage?”

Those projects – Kitimat LNG and Bear Head LNG – not only face the usual regulatory hurdles that all industrial projects face in Canada but also are in a race with “a whole slew of projects” in the U.S., Qatar and Mozambique that are expected to be sanctioned in 2019 or 2020.

Global demand for LNG is expected to grow, especially in China, which is rapidly shifting from coal to gas for power generation. Yao Li, CEO of SIA Energy, estimated China’s demand for LNG imports will rise to 90 million tonnes per year by 2030 from less than 40 million tonnes.

But in the U.S. alone, if all the projects that are investment-ready are approved, it would triple production capacity, from seven trains to 23, said Jack Weixel, vice-president of PointLogic Energy.

Projects sanctioned in 2019 or 2020 would add new production capacity by 2024 or 2025.

“By then, global demand may not be able to keep pace with this pending supply surge,” Weixel said.

In other words, projects that don’t reach a final investment decision (FID) this year or next could get edged out and have to wait for the next demand window, which tends to come in cycles, based on long-term contracts.

Asked last week if Chevron (NYSE:CVX) and Woodside Energy have a date in mind for sanctioning their Kitimat LNG project, Fred Eastwood, manager for Chevron Canada, said, “We don’t advertise dates for FID.”

As those attending last week’s conference learned, the LNG Canada and Woodfibre LNG projects succeeded, where others failed, because they had buy-in from First Nations. They also may have earned some social licence by designing projects that are said to have the lowest greenhouse gas emissions intensities in the world for LNG projects.

Other proponents hoping to develop LNG projects in Canada would do well to take lessons from LNG Canada, Woodfibre LNG and Coastal GasLink, which is building the pipeline that will serve the LNG Canada project in Kitimat. Those companies were able to get an unprecedented buy-in from First Nations.

“This project is making history and showing other industry project people this is how you do it,” said Karen Ogen-Toews, a former Wet’suwet’en chief and current CEO of the First Nations LNG Alliance.

With the exception of a small group of dissidents within the Wet’suwet’en that has been trying to blockade the Coastal GasLink pipeline, the company managed to secure agreements with every First Nation along the pipeline corridor.

“Coastal GasLink set the standard for how to deal with First Nations people,” said Archie Patrick, chief of the Stellat’en First Nation. “You can quote me on that.”

In Woodfibre LNG’s case, the company agreed to abide by an environmental assessment conducted by the Squamish Nation and entered a legally binding agreement with them. Woodfibre is expected to begin construction on its $1.4 billion to $1.8 billion plant in Squamish later this year.

First Nations speakers at last week’s conference said there is such strong support for LNG among B.C. First Nations because they see it as a clean form of energy that provides “economic reconciliation” in the form of revenue, careers and contracts for First Nations.

At peak construction, the LNG Canada plant in Kitimat and associated Coastal GasLink pipeline will require up to 10,000 workers. Tom Sigurdson, executive director of BC Building Trades, said there are enough skilled trades workers in Canada to meet that demand.

But at peak employment in 2021, he said, “we know we are going to have to borrow from our locals across Canada, as well as reach into the United States.”

As of last week, $500 million in contracts had been awarded on the project, according to BC LNG Alliance CEO Bryan Cox, and 600 people were employed, 45% of whom are from the Kitimat-Terrace region.

Perhaps not surprisingly, there is strong support in Kitimat for the project, including from the Haisla Nation, which has been aggressively pursuing an LNG industry for six years.

“In Kitimat, there is almost zero resistance to this project,” said Kitimat Mayor Phil Germuth.

To help First Nations members prepare for careers in the LNG industry, the provincial government invested about $30 million over three years to address barriers to education, training and employment, said Laurel Nash, assistant deputy minister of Indigenous relations and reconciliation.

“Over those three years, we trained over 4,000 people, and 43% of those Indigenous participants have retained employment over that time.”

This article was originally published on Business in Vancouver.

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