LNG Canada committing to start construction on B.C. project this year

LNG Canada is expected to make a final investment decision by the fall of 2018. LNG Canada

The LNG pipe dream may soon become a reality.

Andy Calitz, the head of LNG Canada, committed on Tuesday that his company will start construction on a LNG facility on B.C.’s coast this year. The $40-billion project would be the largest single infrastructure investment in B.C.’s history.

The company has still not made a final investment decision.

An investment decision on the terminal was delayed in 2016 due to low oil prices and lower than expected supply compared to demand. A final decision is expected to come in the fall of this year.

“It didn’t make sense in July 2016,” Calitz said at an LNG conference on Tuesday in Vancouver. “When (our stakeholders) asked the inevitable question, when will you reconsider the FID? Our answer was: We will be in construction in 2018. I reaffirm that commitment today.”

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LNG Canada is a joint venture between Royal Dutch Shell Plc , PetroChina Co. Ltd, Mitsubishi Corp and Korea Gas Corp. TransCanada Corp will build the pipeline.

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In March, the provincial government announced an overhaul of the fiscal framework for the liquefied natural gas industry in an attempt to secure a final investment decision from LNG Canada. The province announced that it will provide a PST exemption on construction costs of any LNG facility.

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The government is projecting that would be a $6-billion rebate for LNG Canada, compared to the framework designed by the previous provincial government.

“Our new approach welcomes investment that puts our province’s people and future first, and rejects the old ways of resource development at any cost,” said B.C. Premier John Horgan said at the time. “Our obligation is to the people who call British Columbia home and our job is to get the best deal for them and the generations that follow.”

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The government has set guidelines for any LNG projects, which include four conditions: a guaranteed fair return for B.C.’s natural resources; guaranteed jobs for British Columbians; respect and make partners of First Nations; and protect B.C.’s air, land and water.

The PST exemption would be paid back to the province if the facility gets up and running through operating performance payments.

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If a final investment decision comes this year, the expectation is work on the project would peak in 2021 with 10,000 workers. As part of this new framework on LNG, the government will also be setting a cap on carbon tax at $30, exempting LNG facilities from paying increases in carbon tax that are expected to go up to $50 a tonne by 2021.

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The rebate on the additional carbon tax would only come if LNG Canada meets its target of being the cleanest LNG facility, in terms of carbon emissions, in the world.

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The B.C. Liberals originally brought forward the idea of an LNG industry in Canada. Former LNG Minister Rich Coleman says he is anticipating LNG Canada will make the final investment decision and B.C. will finally see the construction of a major facility.

“I think sometime this fall if all things fall into place we could very likely see a $40-billion investment,” Coleman said. “It’s huge. There are 13,000 people in this province, just in the northeast part of the province, that rely on the liquefied natural gas industry for their jobs.

“It would get a product we have a huge amount of, we have a 150-year supply of natural gas, and would allow us to ship it to China and other countries. Shipping to China would help with climate and everything else.”

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The B.C. Green Caucus has sent a letter to LNG Canada.

The caucus does not support freezing the carbon tax at $30 a tonne for certain facilities. The agreement the Greens and the NDP have in place included an increase in the carbon tax by $5 per tonne per year beginning April 1, 2018.

— With files from Reuters

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