Trudeau government approves Petronas' $36-billion LNG project in BC

Sep 28 2016, 6:59 am

Prime Minister Justin Trudeau’s Liberal government has provided the $36-billion Pacific Northwest liquid natural gas (LNG) production and export facility project in Prince Rupert, BC with the green light to proceed. The announcement was made by members of the federal cabinet at a press conference held in Richmond this evening.

“The Pacific NorthWest LNG Project will deliver thousands of good middle-class jobs and will help pay for schools and roads and social programs that enrich people’s lives,” said Jim Carr, federal Minister of Natural Resources.

“We are moving forward with natural resource development in a sustainable manner, because we have an obligation to leave the planet in better shape than we found it. This is an exciting day for British Columbia, for Canada and for the natural gas industry in this country.”

The controversial project is spearheaded by Petronas, a global oil and gas company owned by the Government of Malaysia, and will become the largest single foreign direct investment in Canadian history.

It entails constructing a facility on Lelu Island with two LNG liquefaction plants, two LNG storage tanks, a power plant, a two-lane access bridge linking the island with the mainland, marine berths for loading of the LNG onto special LNG carriers to overseas markets, and a suspension bridge connecting the island to the marine berths.

Natural gas will be transported to the facility for processing through a new 900-km-long pipeline to be built and operated by TransCanada from an area in northeastern BC to Prince Rupert.

However, the federal approval comes with 190 legally binding conditions designed to reduce the environmental impact of the project, specifically on fish, marine mammals, wetlands, migratory birds, and human health.

Federal Minister of Environment and Climate Change Catherine McKenna said the approval was following an in-depth scientific review process that was extended by three months earlier this year. The decision was based on scientific findings and consultations with First Nations in the area of the project.

“The only way to get resources to market in the twenty-first century is if it can be done sustainably and responsibly,” said McKenna. “Indigenous communities near the project site will participate with Canada and the province in environmental monitoring, a new innovative approach consistent with the government’s reconciliation agenda and commitment to enhancing the capacity of indigenous groups and reviewing and monitoring major resource projects.”

In exchange for federal approval, the BC provincial government has reaffirmed its support for Trudeau’s carbon pricing plan, which was first announced at the First Minister’s Conference held at Vancouver in March.

3D diagram of the Pacific Northwest LNG facility on Lelu Island at Prince Rupert, BC.

Image: Pacific Northwest LNG / Petronas

Image: Pacific Northwest LNG / Petronas

With a production output of 19.68 million tonnes of LNG per year, the Petronas project is the largest of the proposed LNG projects in BC, which have been core to BC Premier Christy Clark’s goals of generating jobs and new government revenues. It is anticipated that the Petronas project alone will create $2.5 billion in new tax revenues annually for all levels of government and boost Canada’s GDP by $2.9 billion every year. There will be 4,500 construction jobs and 630 direct and indirect jobs once the facility is operational.

Clark’s government has already approved the Petronas project and the federal government was provided with an October 2 deadline to make a final decision on whether the project can proceed.

However, the approval comes at a time when natural gas prices have reached a 20-year-low due to an oversupply in the global market and weakened demand from Asia and Europe. Approximately three dozen LNG projects are also proposed for the coast of North America, and a number of major LNG projects around the world have already been delayed or canceled due to market conditions.

Petronas has recently hinted that it is unsure whether a strong business case remains to build the facility given the weakening market conditions. In August, the company said it will complete a full review of the project for its investors after receiving a report from the Canadian Environmental Assessment Agency on environmental impacts of the facility.

“Upon finalization of the report, we need to conduct a total review of the proposed project prior to tabling it to the project’s partners for Final Investment Decision (FID),” read a statement by Petronas over the summer. “Petronas reiterates that a project of this magnitude requires coherent support from the various relevant stakeholders to work within a reasonable timeframe for successful implementation.”

Earlier this year, the federal government also approved the Woodfibre LNG project in Howe Sound near Squamish. This project is significantly smaller than the Pacific Northwest LNG plan as its output will be between 1.5 and 2.1 million tonnes per year.

Kenneth ChanKenneth Chan