Varcoe: With TMX built, it’s LNG Canada’s turn to cross finish line

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The Trans Mountain expansion is finally done.

Up next, LNG Canada.

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Years in the making, these two megaprojects are about to reset the landscape for Canada’s oil and gas sector by opening up the country’s ability to export energy to the world.

A handful of other projects are also in the queue that will help create a liquefied natural gas industry in the country.

“I’m really happy to see TMX up and running . . . and we’re looking forward to our startup. It’s going to change the dynamic for the Canadian oil and gas industry,” LNG Canada CEO Jason Klein said in an interview.

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“We are over 90 per cent complete overall right now and very much on target for first cargoes (moving) by the middle of 2025, and we’re currently moving into the commissioning phase.”

Speaking on the sidelines of the Calgary Energy Roundtable conference on Thursday, Klein and other industry leaders see a tectonic shift unfolding in the Canadian oil and gas sector.

Despite having a massive resource base, the industry has faced bottlenecks to export products into the United States — largely the sole market for western Canadian crude oil and natural gas.

With only one customer, that has led to discounts on Canadian energy.

The startup this month of the $34-billion Trans Mountain expansion has nearly tripled the amount of western Canadian oil that will be shipped to the Pacific Coast for export, including customers in Asia.

Now, all eyes in the industry are turning to LNG.

The mammoth LNG Canada development, initially estimated by the federal government to be a $40-billion project, will export about 1.8 billion cubic feet (bcf) per day of gas to customers in Asia.

The Shell-led project still has 5,000 people on site on any given day and it’s “full speed ahead” on commissioning the individual elements of the plant, Klein said.

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The export terminal at Kitimat, B.C., will allow Canada to ship super-cooled gas to other countries, after years of standing on the sidelines while gas demand globally has boomed and the United States has transformed itself into the world’s largest LNG producer.

A second phase of LNG Canada is also being considered by its partners.

“We’ll look at affordability, competitiveness, market and timing, all those factors will play in, and, of course, GHG intensity, and how we deliver on all the advantages we have here in Canada,” Klein added.

Those advantages include massive gas reserves, cheap feedstock, shorter shipping time to Asia from Canada than from the U.S. Gulf Coast, and the desire of international customers for diversity of supply.

Its product will have less than half of the GHG emissions intensity of the average LNG facility.

Seeing the Trans Mountain expansion (TMX) and LNG Canada operate will mark a key milestone for the country’s oil and gas industry, said Lance Mortlock, EY Canada’s managing partner of energy.

“For the first time in Canadian history, we’re not reliant on one customer . . . We have the opportunity to sell gas and crude oil to Asia,” he said.

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“It’s a massive moment.”

Critics maintain that developing LNG facilities will increase domestic greenhouse gas emissions. However, proponents point out that Canadian gas sold to Asia can help replace higher-emitting coal now used to generate electricity.

Mike Belenkie, CEO of Advantage Energy, a gas producer active in the Montney, said that after a decade of oversupply in Western Canada, new LNG facilities will increase demand and improve prices for operators.

“It means the end of a 17-year agonizing process where, in spite of all the powerful reasons — economic reasons, environmental reasons, geopolitical reasons . . . there was a never-ending stream of barriers,” Belenkie said.

“We have to celebrate these victories because these are huge country-changing victories.”

International consultancy Rystad Energy projects that Canadian LNG export capacity will increase to an estimated six bcf of gas per day by 2036 as other West Coast projects are built.

The Woodfibre LNG project near Squamish, B.C., is now being developed.

Meanwhile, the Cedar LNG project, a partnership between the Haisla Nation and Pembina Pipeline Corp., is at a pivotal point.

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At its investor day event on Thursday, Pembina said it anticipates a final investment decision will be made next month on the US$3.4-billion project, a floating liquefaction facility near Kitimat.

“What we are doing in Canada is a direct result of growing global demand,” Pembina CEO Scott Burrows said during the investor day presentation.

“The time is now for Canadian energy.”

The Ksi Lisims LNG project, a partnership between the Nisga’a Nation, Western LNG and a group of Canadian gas producers, is also progressing. If it receives the go-ahead, a proposed floating export facility would be developed on the northwest coast of B.C.

Mortlock noted it has taken more than a decade to get one LNG facility approved and constructed in Canada, while the U.S. has built seven projects and approved 21 in six years, and countries such as Qatar and Australia have continued to grow.

But Canada now has a model that can work.

“It will require modernization in terms of our regulatory systems. But some of the points that we put on the board, in terms of how we work with First Nations, we’ve achieved that — so let’s build on that,” he said.

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Indigenous ownership of proposed projects such as Cedar LNG and Ksi Lisims will promote economic reconciliation, and these developments can provide energy security for countries that need gas, said Karen Ogen, CEO of the First Nations LNG Alliance.

Earlier this week, Ogen and 10 Indigenous leaders and members of the Energy for A Secure Future group met with G7 country representatives to talk about LNG, seeking to build international support for the role of gas.

“The other countries let us know that (they’re) still in that position where we need Canada’s LNG,” Ogen said in an interview.

“We need to take that opportunity. It‘s an opportunity for Indigenous people, for Canada and for these countries.”

Chris Varcoe is a Calgary Herald columnist.

cvarcoe@postmedia.com

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