Take a quick trip around the world of LNG

A lot has been happening on the LNG front since Malcolm Baxter's last column...

There’s lots been happening on the LNG front since my last column so this time around we’ll quickly cover as much ground as we can.

Feds come through

It took forever, but the federal government finally came up with the “tax break” that proponents of BC LNG projects have been calling for.

As I explained in my November column, under the then existing rules LNG plants would be treated as a “distribution business” which means it would take around 25 years for the companies to recover their up-front costs. The potential LNG exporters wanted to be treated the same as manufacturers – what’s known as a class 43 designation – which would allow them to recover those costs in as little as eight years.

And they pretty much got what they wanted with the feds increasing the capital cost allowance from 8 per cent to 30 per cent on “equipment and structures” for natural gas liquefaction capital expenditures from February 19, the date of the announcement, to 2024.

While proponents made all the right noises in welcoming the announcement, none were suggesting that this would mean green lighting their projects the next day.

Not surprising given they have to figure out what the plunge in oil/LNG prices does to the economics of their proposed projects and if/how prices might bounce back in the long term.

And as Michael Cuthbert, president of Pacific Northwest LNG pointed out, the industry will still in the long term pay the same amount of taxes.

But every little helps in the near term.

Kitimat LNG

No final investment decision (FID) here for a couple of years yet for this Kitimat project.

Partners Chevron and Woodside of Australia have said they are focusing their capital expenditures this year and next on drilling in the Liard Basin in northeast B.C. to prove up the estimated natural gas reserves that will supply their proposed LNG plant.

There is also the not so tiny problem that the project still doesn’t have any customers.

If everything came together and it got the green light in 2017, the first LNG would not be shipped out until 2021.

Shell (LNG Canada)

Awarded the FEED contract (essentially a design and feasibility study) last fall for this Kitimat project.

Oliver Munar of WorleyParsons, one of the outfits involved in the FEED, said in an October 23 article in the Journal of Commerce that it would be “a couple of years” before Shell could make an FID.

Assuming a positive FID comes down next year, the first LNG will likely flow by 2021.

AltaGas (Douglas Channel consortium)

I am becoming increasingly convinced that this Kitimat project, in which the Haisla have a stake, will get the go-ahead this year, early 2016 at the latest.

The reasons for my rare ray of optimism are four-fold.

First, unlike the mega-projects, it does not have to build hundreds of kilometres of pipeline: AltaGas owns the existing Pacific Northern Gas line which needs only a relatively short extension to be able to feed the proposed LNG barge plant.

Second, one of the partners in the consortium is also a customer  – Idemitsu Kosan of Japan.

Third, it is a comparatively dirt cheap project with an estimated cost of $600 million instead of the multi-billions of dollars the majors are facing.

And finally, the elapsed time between the final investment decision and the first LNG exports is only three years as opposed to the likely five years for the majors.

As for the majors, there are a number of factors that will be taken into account before they make their FIDs – LNG supply and demand globally, the potential impact on that supply and demand of a restart of Japanese nuclear power plants, construction costs and more.

But that will have to wait for another time.

Retired Kitimat Northern Sentinel editor Malcolm Baxer now lives in Terrace. Reach him at msdbax@citywest.ca.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Rio Tinto responds to U.S. aluminum import tariffs

The tariffs were imposed by President Donald Trump Aug. 6

Black bear spotted at Christy Park in Terrace

Bear could be the same individual spotted on the bench recently

Coastal GasLink breaks ground on meter station in Kitimat

Meter station marks final point on pipeline that stretches from Northeast B.C.

Signs of the times: Terrace sign makers’ businesses evolve during COVID-19 pandemic

Scaife Signs and Silvertip Promotions & Signs Inc. created COVID-19 related materials in Terrace

New statue placed at George Little Park in Terrace

Kermode bear cub to commemorate Terrace Kinsmen’s contribution to the park’s renovations

53 new COVID-19 cases, no new deaths cap off week of high infection rates in B.C.

Roughly 1,500 people are self-isolating because they either have COVID-19 or have been exposed to it

VIDEO: Internet famous Yukon-based bhangra dancer explores Vancouver Island

Gurdeep Pandher spreads joy through dance, forms cross-cultural connections amid pandemic

Unofficial holidays: the weird and wonderful things people celebrate around the world

On any given day of the year, there are several strange, silly or serious holidays to observe

Moving on: Tanev scores 11 seconds into OT as Canucks oust Wild

Vancouver beats Minnesota 5-4 to move into first round of NHL playoffs

Gene editing debate takes root with organic broccoli, new UBC research shows

Broccoli is one of the best-known vegetables with origins in this scientific haze

VIDEO: U.S. Air Force pilot does fly-by for B.C. son amid COVID border separation

Sky-high father-son visit plays out over White Rock Pier

3 Vancouver police officers test positive for COVID after responding to large party

Union president says other officers are self-isolating due to possible exposure

New mothers with COVID-19 should still breastfeed: Canada’s top doctor

Dr. Theresa Tam made the recommendation during World Breastfeeding Awareness Week

Collapse of Nunavut ice shelf ‘like losing a good friend:’ glaciologist

The ice shelf on the northwestern edge of Ellesmere Island has shrunk 43 per cent

Most Read