On March 26, 2014, the Government of Canada approved four long-term liquefied natural gas (LNG) export licences for Pacific NorthWest LNG, Prince Rupert LNG, WCC LNG and Woodfibre LNG. The four export licences authorize the export of a total of up to 73.38 million tonnes per annum (mtpa) of LNG.
This approval by the Government of Canada is the last step in the approval process for the issuance of a LNG export licence. While obtaining a long-term National Energy Board (NEB) export licence is one key step in the approval process for these LNG projects, additional permits and approvals are still required. The outstanding project approvals will focus on facility and construction approvals and environmental assessments from provincial and federal regulators, including upstream approvals for pipelines.
Under the National Energy Board Act, the NEB regulates the import and export of natural gas. When reviewing LNG export licence applications, the NEB assesses whether Canada's supply of natural gas is large enough to easily accommodate our domestic needs as well as the proposed LNG exports, while having regard to the trends in the discovery of gas in Canada.1
The NEB approved these four applications on December 16, 2013. A review of these applications and the corresponding projects can be found our previous post. Since 2011, the NEB has already issued three 20 to 25 year LNG export licences for up to 36 mtpa and is now reviewing five additional applications.2
As emphasized in the Minister's news release, these approvals are a big step forward in opening the door for Canada's LNG to reach world markets. They also reinforce the Government of Canada's commitment to supporting Canada's LNG projects.
Other Recent Developments in the Export of LNG
On March 24, 2014, the United States Department of Energy (DOE) conditionally authorized the Jordan Cove Energy Project, L.P. (Jordan Cove) to export LNG produced in the United States (US) to countries that do not have a Free Trade Agreement with the US. Subject to environmental review and final regulatory approval, the Jordan Cove facility is conditionally authorized to export at a rate of up to the equivalent of 0.8 billion standard cubic feet per day (Bcf/d) of natural gas, for a period of 20 years.
Although the NEB previously approved the issuance of 25 year natural gas export licence to Jordon Cove for a maximum term amount of 442.68 109 m³, the licence remains subject to approval of the Governor in Council. The proposed export points include existing natural gas pipelines that cross the Canada/US border near Kingsgate and Huntingdon, B.C. As with the Canadian projects, the DOE's conditional approval of the export licence is an important first step for any project; however, additional facility approvals from the Federal Energy Regulatory Commission (FERC) must still be obtained.
At present, it is not clear how long FERC will take to complete its regulatory review process and issue the required approvals. In addition, Oregon based projects are faced with local state regulatory sanctions and also face local concerns over the development of LNG projects.
Canada is vying with the US, Australia, Russia, East Africa and the Middle East to rapidly build the infrastructure required to move LNG to key markets in Japan, Korea, Taiwan, China and India. With the issuance of the conditional export licence, the Jordon Cove facility adds one more factor to its potential competitive advantage over the Canadian LNG projects. Specifically, the Jordon Cove facility does not have the same issues faced by the Canadian projects, namely non-existent infrastructure, First Nations and provincial tax issues which may help its position in the global LNG race.
US Response to Russia's and Support of the Ukraine
The US Subcommittee on Energy and Power announced on March 17, 2014, that it intends to review a LNG Export Bill which will expedite exports of US LNG to its allies. According to the news release, "the legislation would grant immediate approval of complete export applications currently filed with the [DOE] and modify the process moving forward to ensure exports to our allies are not subject to unnecessary delays."3
Based upon the quote provided from President Obama, part of the motivation behind the LNG Export Bill is to support the Ukraine by unlocking US natural gas supplies to free it and the rest of Europe from Russia's influence.4 This demonstrates the push for LNG projects from both sides of our border. The reality is that most, if not all export projects are two years away from the first LNG being exported to global markets. Therefore, it is unlikely that the allies of the US and Canada (i.e. Europe) will reap the benefits from Canadian or US LNG any time soon. That said, if this does happen, that type of impetus has far reaching implications on the assumed belief that all US LNG was headed to Asia and it could create more interest from Asia in the Canadian projects. If US LNG is be redirected to European allies for political and economic reasons, Asia's demand will need to be sourced from other sources such as Canada's West Coast and East Africa.
We will continue to monitor the sector and continue to update our blog as further events unfold.
1. National Energy Board Act, RSC 1985, c N-7, s 118.
2. Government of Canada, News Release, "Backgrounder: Four Long-term LNG Export Lciences" (26 March 2014) online:< http://news.gc.ca/web/article-en.do?nid=829329>.
3. United States Subcommittee on Energy and Power, News Release, "Subcommittee to Begin Review of LNG Exports Bill Next Tuesday" (17 March 2014) online: http://energycommerce.house.gov/press-release/subcommittee-begin-review-lng-exports-bill-next-Tuesday.