Colombia LNG delay could benefit northwest B.C. project

There is an old expression that goes, “It’s an ill wind that blows nobody any good," writes Terrace Standard columnist Malcolm Baxter

There is an old expression that goes, “It’s an ill wind that blows nobody any good.”

Case in point was the February 5 blizzard, about as ill a wind as you could get. Yet despite the general chaos and misery, it was good news for the local heavy equipment contractors who suddenly found their services in high demand.

In the LNG world, there is a similar example where the impact of a price hurricane felt in the Caribbean just might translate into a warm breeze that fills the sails of an LNG proposal in our backyard. To explain, in 2012 a Belgian outfit called EXMAR signed an agreement with Canadian-based Pacific Rubiales Energy (PRE).

EXMAR was to build, own, operate and maintain the first floating natural gas liquefaction plant in the world while PRE, which owns gas fields in Colombia, had exclusive rights to supply and liquefy up to half a million tonnes of LNG a year for 15 years.

EXMAR awarded the contract to build the LNG barge to Wilson Heavy Industry of Nantong, China and the plan was to have it up and running in Colombia in the second half of this year.

Everything went swimmingly with Wilson on February 4 confirming the barge would sail away from its yard bound for South America by June of this year.

So smoothly did everything run that EXMAR ordered a second barge in December of last year with a delivery date of 2017.

So what is the connection to projects up here? Well, EXMAR is one of the members of the newly-formed consortium planning to have a floating LNG plant moored on the west side of the Douglas Channel and operational sometime in 2018.

It also just happens that the Douglas Channel plan is for a barge capable of producing a half a million tonnes of LNG per year.

And this is where the ill wind comes into play. On February 3, EXMAR announced in its quarterly report that PRE had decided to delay the Colombia project because of “unfavourable energy market conditions.”

The same day, in an interview with energy publication Interfax, Peter Volk, general manager of PRE, floated (pardon the pun) another possibility.

“We are looking at various alternatives which would represent lower (capital expenditure) commitment in order to improve overall returns,” he said. “These include locations not only in Colombia but also other countries.”

Canada for instance? Volk wouldn’t say. But it strikes me that a logical play by PRE, given there is already a second barge under construction, is to cut a deal with the Douglas Channel consortium that would see the first barge park up here and the second one go to the delayed Colombia project.

Which could translate to Douglas Channel being up and running two years ahead of the current plan. I know, it’s all horribly speculative. But stranger things have happened in the world of LNG. Speaking of strange, when it comes to economic development prospects, there are optimists, pessimists and, sandwiched somewhere between the two, realists.

Then there is premier Christy Clark. To go back to the beginning, in September 2011, Clark announced the BC Jobs Plan which included the forecast that there would be one LNG plant up and running in the province by 2015 and a total of three by 2020.

Now in fairness to the premier that bold prediction didn’t seem unreasonable at the time.

But as so often happens with economic development proposals in our corner of the world, the reality turned out to be very different.

A first small LNG project at Kitimat, now resurrected in the form of the new Douglas Channel plan, crashed and burned when LNG Partners went bankrupt.

One by one the original three partners – Encana, EOG and Apache – pulled out of the Kitimat LNG project.

And the Shell-led consortium behind LNG Canada found out that things take a lot longer in B.C. than they might have experienced elsewhere.

Plus the price of LNG has nosedived.

So here we are in 2015 with not a single LNG plant up and running and, worse, no solid indication we will see any of the big projects green-lighted this year.

So what does the premier say at the tail end of last month? “We are still on track to meet our goal of three LNG plants up and running by 2020.”

Talk about denial!

Retired Kitimat Northern Sentinel editor Malcolm Baxter lives in Terrace, B.C. He can be reached at