Woodfibre proceeding with B.C.’s first major LNG project in Squamish
GORDON HOEKSTRA AND DERRICK PENNER
The Vancouver Sun
Premier Christy Clark donned a hard hat Friday to join Woodfibre LNG executive Byng Giraud, as he announced what amounts to his company’s funding approval for a proposed $1.6-billion natural gas liquefaction plant.
Giraud, country manager for Woodfibre LNG, said the board’s decision is the equivalent of a final investment decision for the project, which will export 2.1 million tonnes of LNG per year to Asia starting in 2020.
The company still needs to secure natural gas supplies in B.C.’s northeast, a permit from the B.C. Oil and Gas Commission and its engineering consultants are still working on details of construction costs, but, as Giraud said, “this project is a go.”
The announcement is welcome news for Clark ahead of the May 2017 election, after two years of headlines about LNG proponents cancelling projects, delaying proposals and being caught in indecision in the middle of a supply glut that has collapsed global prices for the fuel.
“This is the first of 20 projects that are in the pipeline somewhere to go forward so far, and I’m just delighted to say that LNG in British Columbia is finally becoming a reality,” Clark said.
Woodfibre, which will be built on an old pulp mill site south of town, is the smallest of the leading four proposals in B.C., promising 650 construction jobs and 100 permanent operating jobs. Other proposals include the Shell Canada-led, $25-billion LNG Canada venture, which is currently on hold.
“It gives (Clark) the first half of the soundbite. ‘We took action and there’s a plant that is about to be built,’” said Mario Canseco, vice-president of public affairs for pollster Insights West.
“But it’s nowhere (close to what Clark) promised.”
Canseco’s firm has been tracking attitudes on key issues such as the economy, the environment and housing in the province and said it won’t be easy for the B.C. Liberals to convince voters that they’ve delivered on the LNG file.
And it is unlikely that any other LNG proponent will come through with a final investment decision before the election next May, according to an update from natural gas development minister Rich Coleman.
The announcement also comes at time when there is still a high level of uncertainty within the global LNG industry.
Ed Kallio, principal and analyst with Calgary-based Eau Claire Energy Advisory, said the Woodfibre announcement was encouraging and a “pretty big step” that shows its board of directors has confidence the elements are in place to go ahead.
However, Kallio said the economics for LNG are currently upside down, with prices for the fuel in Asia not high enough to cover a project’s cost. He said prices would need to rise and stabilize by 2020 to make the project viable.
Giraud, however, was less concerned about market prices.
“We’re a bit of a different company, we can take different sorts of risks,” he said.
Woodfibre is a private company and can “take a longer view” than the big public companies that have quarterly obligations to shareholders, he said.
Also, Woodfibre’s parent company, Pacific Oil & Gas Limited, which is part of the Singapore-based RGE group, owns natural gas-fired power plants and shares in an LNG import terminal in China, so is approaching the deal as more of a customer, Giraud said.
The company’s decision was helped along by a key concession from the province on electricity prices. Woodfibre was granted B.C. Hydro’s heritage industrial rates because it plans to use electricity to drive its liquefaction process, not burn natural gas as others have proposed.
That rate is $60 per megawatt hour, which is cheaper than the $84 per megawatt hour that the province negotiated with LNG producers to cover electricity for ancillary needs — but energy and mines minister Bill Bennett doesn’t consider it a subsidy.
Clark said this price — dubbed the “eDrive” rate — will be open to any other LNG proposal that switches from gas to electricity to power liquefaction.
The eDrive news was welcomed by B.C.’s independent power producers, which have been lobbying to become suppliers to the LNG industry.
“It is important to electrify LNG facilities in order to help gain social licence and mitigate climate change concerns,” said Paul Kariya, executive director of the IPP lobby group Clean Energy B.C.
However, while Clark continued to tout LNG as an option to help displace dirtier emissions from coal, environmentalists again condemned her LNG ambitions.
The Woodfibre plant undermines B.C.’s attempts to meet its own climate-change goals, according to Pembina Institute associate director Matt Horne.
The project also faces considerable opposition within Squamish itself, where a growing number of residents see the LNG development as incompatible with the town’s post-industrial identity as an eco-tourist destination.
Woodfibre and the province made the announcement at the proposed plant site a day after the company’s community office was vandalized by a fire that damaged the building’s exterior.
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