Canada: The BC LNG Sector Remained Active Through 2013: End-Of-Year Update

British Columbia's emerging liquefied natural gas (LNG) sector remained active throughout the second half of 2013. Governments and proponents negotiated agreements and projects advanced through various regulatory processes. Given continued interest in BC's new industry, we prepared the following end-of-year update that summarizes notable LNG sector activity.

Since our mid-year summary:

  • An LNG export licence application was filed with the National Energy Board (NEB) for the Woodfibre LNG Project. The Woodfibre LNG Project is located near Squamish and has a proposed capacity of about 2.1 million tonnes per year.
  • The BC government approved $115.8 million in royalty credits under the province's 2013 Royalty Credit Program in order to encourage the construction of new resource roads and pipelines and advance the development of the LNG industry. Preliminary estimates suggest that the 2013 royalty credits will generate $445 million in government revenue over a five-year period and encourage another $320 million in new capital spending by industry.
  • In October, Minister of Natural Gas Development Rich Coleman made a 12-day LNG development trip to meet with LNG proponents and investors in China, South Korea and Malaysia.
  • Triton LNG Limited Partnership, a 50-50 joint venture between AltaGas Ltd. and Idemitsu Canada Corporation, filed a LNG export licence application to export up to 2.3 million tonnes of LNG annually over a 25-year term. As the Triton LNG facility proposes to utilize a floating liquefaction storage and offloading vessel, the proponents are considering locating the project at Kitimat or Prince Rupert.
  • As discussed in our prior post, a federal-provincial study concluded that natural gas reserves contained in the Montney Formation that straddles BC and Alberta are more than double than previously estimated, equivalent to 145 years of supply at Canada's current consumption levels.
  • BC's Environmental Assessment Office (EAO) and Oil and Gas Commission (OGC) entered into a memorandum of understanding (MOU) intended to streamline environmental assessments and permitting for LNG and other reviewable projects by reducing duplication and improving timelines. Our prior post discusses the implications of the MOU in greater detail.
  • The BC government and Nexen Energy ULC, a subsidiary of CNOOC Limited and its joint venture partners, INPEX Corporation and JGC Corporation, entered into an agreement that provides the proponents with an exclusive right to move forward with planning an LNG facility (called Aurora LNG) at Grassy Point, near Prince Rupert. This agreement resulted from the Request for Expression of Interest initiated by the BC government in February 2013.
  • Aurora LNG also filed an NEB export licence application, seeking to export up to 24 million tonnes of LNG annually over a 25-year term.
  • As discussed in our prior post, the BC government announced that it will delay its launch of the tax regime for the LNG sector. Although Minister Coleman previously indicated that the province was close to finalizing applicable tax rules and expected to provide details by the end of November, the announcement will be delayed until early next year so that the government may better understand the business models of LNG projects and formulate a more effective and efficient tax regime.
  • On a jobs and trade mission to Asia that began in late November, Premier Christy Clark signed a three-year memorandum of energy co-operation and development with Japan's Minister of Economy, Trade and Industry Toshimitsu Motegi to expand co-operation between the governments and foster energy-related business opportunities. Premier Clark also renewed a memorandum of understanding (MOU) on mutual co-operation with Japan Oil, Gas and Metals National Corporation (JOGMEC) under which JOGMEC and the province agree to work together and share information on natural-gas related activities. The MOU between BC and JOGMEC was originally signed in May 2012.
  • JAPEX also announced plans to build an LNG terminal in Japan's Fukishima prefecture to receive its share of LNG from the Pacific NorthWest LNG project. The terminal will commence operations in 2018 and will receive 1.2 million tonnes of LNG annually.
  • Petroleum Brunei announced that it has agreed to acquire a 3-per-cent stake in the Pacific NorthWest LNG project led by Malaysia's PETRONAS. Since acquiring Progress Energy Resources Corp. and launching the Pacific Northwest LNG project, PETRONAS has sought new partners to help develop the large-scale project and associated gas fields. Japan Petroleum Exploration Co. (JAPEX) acquired a 10% stake in the Pacific NorthWest LNG project earlier this year.
  • As discussed in our prior post, the BC government confirmed its approval of BC Hydro's Integrated Resource Plan (IRP). As BC Hydro's long-term planning document, the IRP sets out how BC Hydro anticipates meeting the anticipated future electricity needs of the province, including demand from the new LNG sector. In the IRP, BC Hydro committed to encouraging the LNG industry to acquire clean or renewable electricity from the utility, including for ancillary power at larger-scale plants and for both compression and ancillary requirements of smaller projects. BC Hydro also recognized that it may need to adjust its load-resource balance forecasts if LNG-related power demands are less or greater than originally estimated.

BC's LNG sector is expected to remain active throughout 2014 as proponents advance environmental assessment and permitting processes, receive decisions from the NEB on export licence applications, and secure additional investors and LNG purchasers for their respective facilities. We will continue to monitor the sector and continue to update our blog throughout the New Year.

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