An $18-billion energy project is one-third of the way toward completion in British Columbia, but the consortium’s chief executive officer is wary of the impact of construction delays.
Peter Zebedee said LNG Canada expects to be on budget with building the terminal for exporting liquefied natural gas from Kitimat, B.C.
The consortium, led by Royal Dutch Shell PLC , signed a financial deal in 2018 with the prime contractor to control costs. The wild card, however, is whether delays in the short term arising from COVID-19 restrictions to reduce the risk of transmissions in the work force would have long-lasting impacts on the multiyear construction timetable.
LNG Canada has set a goal to begin exporting natural gas in liquid form to Asia “by mid-decade,” which industry analysts interpret to mean in 2025.
“With any other project this size, there’s always a bit of an ebb and a flow,” Mr. Zebedee said in an interview. “We are committed to drive to make up any time that we have lost.”
He said he supports restrictions during the pandemic, including measures that led to temporarily decreasing the work force last year. LNG Canada is now gearing up to increase the number of construction workers in Kitimat, as approved by the province.
About 1,200 workers were on the job last week. Project managers plan to gradually raise the number of people on site to 3,000 by the end of March.
LNG Canada began a mandatory rapid-screening program for COVID-19 in January, after two separate outbreaks in the work force in November and December. “All of those were contained. There was no spread into the broader community,” Mr. Zebedee said.
At the peak of construction, from next year through 2024, the Kitimat project will require 7,500 workers on rotation, with room for 4,500 people at any given time at the on-site accommodation centre called Cedar Valley Lodge.
As Mr. Zebedee oversees LNG Canada, he expressed concern about the pipeline construction schedule of Coastal GasLink, which is being built to transport natural gas from northeast B.C. to Kitimat.
TC Energy Corp. is the operator of Coastal GasLink. TC Energy CEO François Poirier said on Feb. 18 that Coastal GasLink faces some disruptions, including delays related to COVID-19 cases, in its construction timetable for the 670-kilometre route. “We expect that project costs will increase and the schedule will be delayed,” he said during a conference call with industry analysts.
Mr. Zebedee said LNG Canada values its friendship with Coastal GasLink, and the two sides are seeking to resolve disagreements stemming from escalating pipeline costs.
“We are disappointed with the comments that Coastal GasLink made,” Mr. Zebedee said. “We want to make sure that they continue to progress against their commitments on costs and schedule. And we want to make sure that the pipeline costs, as incurred, are in fact reasonable and prudent.”
Coastal GasLink currently carries a price tag of $6.6-billion.
The goal is to complete the pipeline by late 2023, start testing the line in 2024 and have LNG Canada super-cool natural gas into liquid form in 2025 for export on Asia-bound tankers.
Some environmental groups argue that LNG should not be viewed as a transition fuel to help countries in Asia decarbonize because LNG is hampering the growth of renewable energy.
Mr. Zebedee counters that LNG is helping Asia reduce carbon emissions, displacing coal at power plants. “There is most definitely a role for LNG in decarbonizing, certainly offsetting more intensive emission sources in Asia,” he said.
He emphasized that LNG Canada’s terminal construction has the support of the Haisla Nation and other Indigenous groups in the Kitimat region.
The export terminal, including an LNG storage tank that will be 12-storeys tall, is being constructed on the Haisla’s traditional territory.
Besides the Haisla, other First Nations that have endorsed the Kitimat terminal include the Kitselas, Gitxaala, Kitsumkalum and Gitga’at. “It’s these relations that that are so important to us,” Mr. Zebedee said.
The elected band councils of 20 Indigenous communities along the Coastal GasLink route have agreed to support the pipeline. But the Office of the Wet’suwet’en, a non-profit society that represents hereditary chiefs who oppose the pipeline, said elected Indigenous leaders don’t have jurisdiction over the Wet’suwet’en’s traditional, off-reserve territory.
LNG Canada estimates project-related costs could total $40-billion, counting the Kitimat terminal, the pipeline, various infrastructure and drilling for natural gas in northeast B.C.
More than 60 per cent of the total budget is to be spent in Canada.
LNG Canada’s prime contractor is JGC Fluor BC LNG JV, an engineering joint venture between JGC Corp. and Fluor Corp. Huge modules, including some that are 13-storeys tall, are being built at a fabrication yard in Zhuhai, China, by a joint venture between Fluor and Beijing-based China National Offshore Oil Corp.
A separate Chinese fabrication yard is located in Qingdao.
The modules will start arriving in the fourth quarter of 2021 by vessels from China, destined for final assembly in Kitimat.
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