A proposal to double LNG Canada’s export capacity hinges on the economic viability of using innovative electric technology to help produce liquefied natural gas, says the chief executive officer of Petronas Energy Canada Ltd.
The Shell PLC-led megaproject in Kitimat, B.C., is the only LNG export terminal under construction in the country, with Phase 1 scheduled to open in 2025. Malaysia’s state-owned energy giant Petronas is the second-largest partner.
Electric-drive technology for the proposed Phase 2 would be designed to reduce carbon emissions in the production process for supercooling natural gas into liquid form, Izwan Ismail said in a phone interview from Calgary.
“It’s something you have to look at in terms of cost competitiveness and actual supply of electricity,” he said.
By contrast, Phase 1 under construction in Kitimat will be equipped with turbines powered by natural gas in the liquefaction process.
Kuala Lumpur-based Petronas wholly owns Calgary-based Petronas Energy Canada, which is the upstream unit that oversees natural gas assets in the North Montney region of northeast British Columbia. The Malaysian company owns 25 per cent of LNG Canada through a separate wholly-owned unit, North Montney LNG Limited Partnership.
“We’re very excited about what we’re doing here in Canada because a lot of our aspirations tie very nicely with what we’re doing in the upstream and of course the work that’s been done on LNG Canada as well,” Mr. Ismail said.
The goal under Phase 1 is to export 14 million tonnes a year of LNG to Asia. If Phase 2 gets approved by the co-owners, it would double the capacity to 28 million tonnes a year at the terminal, which is located on an industrial site on the traditional territory of the Haisla Nation.
“All things being equal, Phase 2 will have obviously certain advantages because you’re going to have existing infrastructure already being built under Phase 1,” Mr. Ismail said.
One option for Phase 2 is designing special compressors powered by electric motors to supercool natural gas, relying on hydroelectricity from BC Hydro instead of using turbines driven by natural gas. Another option would be a hybrid-type approach, utilizing gas-fired turbines initially and then subsequently switching over to electric power.
“All of those options are being reviewed at the moment,” LNG Canada construction general manager Vince Kenny told The Globe and Mail while on duty at the Kitimat industrial site, the former location of Methanex Corp.’s methanol plant, which closed in 2006.
LNG Canada’s Phase 1 would operate at 0.15 carbon dioxide equivalent tonnes for each tonne of LNG produced, which is below B.C.’s limit for “emissions intensity” of 0.16 CO2 equivalent tonnes.
“We really do have a differentiated environmental product when you look at what LNG Canada is doing,” said Teresa Waddington, vice-president of corporate relations at the Shell-led project.
But Dan Woynillowicz, a Victoria-based climate and energy policy consultant, said even though LNG Canada bills itself as having the lowest emissions intensity among major LNG projects in the world, the focus should be on moving toward renewables and shifting away from fossil fuels as many countries strive for net-zero emissions by 2050.
“It will be the cleanest new project, but that doesn’t mean that it’s clean enough,” Mr. Woynillowicz said. “If we look at LNG Canada’s Phase 1 within the context of B.C., it will be adding a significant chunk of new greenhouse gas emissions, which means that every other sector in B.C. has to reduce their emissions more to be able to accommodate that project and still have the province achieving its climate targets.”
He said burning natural gas to create electricity is cleaner than burning thermal coal, but he has doubts from a climate perspective about the industry’s portrayal of LNG as a good transition fuel in the years ahead. “While there may be some role for natural gas as a transition fuel, that role may be quite fleeting,” Mr. Woynillowicz said, adding that more attention should be devoted globally to other areas such as bolstering hydrogen production and reducing carbon footprints.
Other groups, such as Stand.earth and the Canadian Centre for Policy Alternatives, have warned about methane leaks from the production of natural gas through hydraulic fracturing, or fracking.
In a recent media briefing in Kitimat, however, LNG Canada chief executive officer Jason Klein said LNG from B.C. will play a crucial role in helping displace coal used in Asia for electricity generation. “The climate challenge isn’t a B.C. challenge. It is a global challenge,” Mr. Klein said. “It’s not just about displacing coal. It’s also about getting people out of energy poverty around the world.”
He said Shell, Petronas and the three other co-owners of the megaproject will ultimately decide whether it makes economic sense for Phase 2 to use lower-carbon hydroelectricity from BC Hydro to power motors to produce LNG.
There isn’t sufficient infrastructure today for BC Hydro to provide enough hydro power for electric-drive technology at the Kitimat facility, but new transmission lines are possible.
B.C. Energy Minister Bruce Ralston, who is the cabinet minister responsible for BC Hydro, said electrification would be an important aspect of LNG Canada’s potential expansion.
“LNG Canada has expressed the wish to explore the possibility of proceeding with Phase 2, and we’re engaged in discussions with them,” Mr. Ralston said.
Global LNG demand has surged following Russia’s invasion of Ukraine in February, with fears of fuel shortages as Europe heads into the winter heating season. The continent is seeking to reduce its dependence on natural gas from Russia, which supplied nearly 40 per cent of the Europe Union’s total consumption of the fuel last year.
Mr. Ismail said LNG Canada will be able to indirectly help Europe within three years because exports from the Kitimat terminal will contribute to the security of supplies globally and free up LNG to be rerouted to European countries from elsewhere in the world.
“I think that definitely there’s going to be strong global LNG demand,” Mr. Ismail said.
On the local level, construction of LNG Canada’s Phase 1 has produced uneven economic spinoffs for Kitimat retailers and restaurants. Out-of-town workers staying at the accommodation centre on the construction site already have access to a wide range of amenities, including dining areas, a full-size basketball court, a climbing wall and a miniature golf course.
Still, numerous LNG Canada workers and subcontractors keen on playing an actual 18-hole round of golf flocked to the Hirsch Creek Golf and Winter Club during several warm days in mid-September, leading to longer waits for tee-off times and a rush of food orders at the clubhouse restaurant.
Dale Robinson, a local computer consultant who played the Hirsch course on a cool and quiet day in late September, described the scene he witnessed on one hectic late-summer day. “The work trucks filled up the parking lot, right to the back over there,” he said. “Before the weather turned, I couldn’t even get on to golf.”
Mr. Robinson wonders whether the high-flying local economy is headed for a hard landing if Phase 2 doesn’t get approved. “It’s booming now, but it could go bust,” he said.
Industry observers estimate project-related costs will total $45-billion for LNG Canada’s Phase 1, counting the $18-billion Kitimat terminal and various infrastructure that includes the $11.2-billion Coastal GasLink pipeline to be operated by TC Energy Corp.
The contentious pipeline route would transport natural gas from northeast B.C. to Kitimat.
Shell is the largest partner in LNG Canada, with a 40-per-cent stake, followed by Petronas at 25 per cent. The other co-owners are PetroChina (15 per cent), Japan’s Mitsubishi Corp. (15 per cent) and South Korea’s Kogas (5 per cent).