LNG Canada’s optimistic CEO seeks a prime contractor for export terminal

It seems Andy Calitz did not get the memo from industry experts about Canada missing the boat on exporting liquefied natural gas to Asia.

Far from giving up, the chief executive officer of LNG Canada considers it’s a matter of when rather than if a $40-billion export terminal will be constructed in Kitimat in northwestern British Columbia. This week, the National Energy Board declared the Royal Dutch Shell PLC-led consortium’s request to extend the deadline for if exports must begin to Dec. 31, 2027, rather than the end of 2022.

If construction were to begin in late 2018, it would take five years to get the terminal ready for exports to begin in late 2023 — too late to fulfill the first expiry date but meeting the new deadline for shipments to commence under the 40-year licence in the NEB..

“I don’t subscribe to the opinion that the expansion period for LNG or natural gas is over,” Mr. Calitz stated in an interview.

Despite the gloomy outlook for LNG tips globally, he’s pressing ahead with the legwork necessary to assemble the export terminal on an industrial site in Kitimat. Mr. Calitz has been maintaining 110 workers occupied with preliminary work on a job that industry observers think will probably be the best and last opportunity to get a significant LNG terminal to be built in Canada.

Energy analysts have written a series of reports over the last few years with increasingly pessimistic views on the probability of B.C. ever seeing any LNG projects.

Some experts conclude that Canada has already missed its window of opportunity. Mr. Calitz, however, is an unabashed optimist.

First, LNG Canada must pick the prime contractor. The deadline for submissions from four bid teams is Nov. 30, and the selection process should be completed in the next quarter of 2018.

Mr. Calitz said a decision on whether to move to the initial phase of construction will be made following the prime contractor is selected. He does not have a particular target date for showing a red or green light for the job, although analysts expect an announcement in the next half of 2018 after Shell and its partners make their minds up.

Analysts had anticipated LNG Canada to create a final investment decision (FID) at the end of 2016, but amid a worldwide glut of the fuel, the consortium announced a delay in July, 2016.

“The time will soon come for another FID. Speaking as LNG Canada, I’m quite optimistic it’ll be us,” said Mr. Calitz, who will be delivering a speech on Friday to the Greater Vancouver Board of Trade. His subject will be the leadership struggles in attempting to create a megaproject in British Columbia.

Rather than going to a holding pattern with very little action, LNG Canada has been conducting a thorough review of the job and even began dismantling aging infrastructure like storage tanks on the proposed Kitimat export website where methanol manufacturer Methanex Corp. closed operations in 2006. The site cleanup began in July and is halfway toward conclusion.

The Shell-led group expects to find cost savings for building while at the same time searching for economic signs that the current glut of LNG internationally will slowly ease and eventually make an opening for new supplies in the long run.

Shell holds 50 percent of LNG Canada. South Korea’s Kogas and Japan’s Mitsubishi Corp. each have a 15-per-cent bet, while PetroChina Co. Ltd. possesses a 20-per-cent interest in the consortium.

An industry source said Malaysia’s state-owned Petronas would like to combine the LNG Canada consortium, but Mr. Calitz declined to comment on whether Petronas could be successful in its quest to acquire a minority interest.

In July, Petronas-led Pacific NorthWest LNG cancelled rival plans to construct an export terminal near Prince Rupert, located roughly 200 kilometres west of Kitimat.

“The announced cancellation of the Pacific NorthWest LNG project was both negative and positive for LNG Canada. Allow me to begin with the negative. That announcement strengthened the perspectives of both the critics that say LNG shouldn’t occur from British Columbia and the skeptics who say it will not happen,” Mr. Calitz stated.

On the positive side for LNG Canada, competition for skilled trades is sharply decreased because Pacific NorthWest LNG bowed out, he said. “In the past, we had assumed that there could be more than 1 energy project under simultaneous building in British Columbia. The pressure on locating the 19 trades within a period of five years is decreased, which brings the expense of building the plant {}”

Mr. Calitz is well aware of the high stakes, particularly for the B.C. market generally and the Haisla Nation particularly. LNG Canada’s terminal site and wharf are situated inside the Haisla’s traditional land.

“Our delay last year was a bitter disappointment for the Haisla. At exactly the exact same time, they’ve remained unbelievably supportive,” he said.

Crystal Smith, the Haisla’s elected chief councillor, said she’s holding out hope that LNG Canada will forge ahead and the financial benefits will have far-reaching consequences, such as jobs for Indigenous employees. “LNG is the most acceptable product that could be sent from our traditional territory. It’s still a massive focus for us,” she explained from Kitamaat Village. The Haisla’s traditional home is on the east side of Douglas Channel in Kitamaat Village, situated near Kitimat.

In 2015, LNG Canada received environmental assessment approvals provincially and federally.

Courtesy: The Globe And Mail

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