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Report on Business LNG Canada presses ahead with construction despite continuing dispute with Wet’suwet’en group

LNG Canada is forging ahead with construction of its $18-billion liquefied natural gas export facility despite a continuing dispute with a group from Wet’suwet’en Nation along the route of the required pipeline, company chief executive Andy Calitz said Tuesday.

At an industry conference in Toronto, Mr. Calitz said the international consortium, which is led by Royal Dutch Shell PLC, has already spent nearly $3-billion on the project and has locked down contracts in China where modules for the processing facility will be fabricated for assembly in Kitimat, B.C.

The export project is one of the rare bright spots for the Western Canadian oil and gas sector, which has seen depressed prices for gas and lack of sufficient pipeline for crude that has resulted in government-mandate production cuts.

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The LNG project faces challenges from a group led by eight hereditary chiefs of the Wet’suwet’en Nation. The hereditary chiefs seek to block TransCanada Corp.’s access to right of way for the Coastal GasLink pipeline, which would connect the LNG facility with the natural gas fields of northeastern B.C.

But LNG Canada has the support of First Nations in Kitimat and along the route and has already allocated more than $175-million in contracts with Indigenous-led businesses in British Columbia, Mr. Calitz said.

“I’m confident that the CGL pipeline will be built by TransCanada on schedule, and that they’ve got the right plans in place to technically build the pipeline, engineering-wise, but also to deal with First Nations issues, given that they have the support of 20 First Nations along the pipeline,” he said after his presentation.

The LNG Canada consortium includes four major Asian partners – Petronas of Malaysia; Beijing-based PetroChina; Japan’s Mitsubishi and South Korea’s state-owned Kogas.

In addition to the challenge from members of the Wet’suwet’en Nation, the project faces regulatory risk after B.C. environmental consultant Mike Sawyer launched an appeal to the National Energy Board. He is arguing the federal regulator should have overseen the environment assessment and permitting rather than the province’s Oil and Gas Commission.

The NEB has set aside two days for oral arguments in early May for the matter.

Mr. Calitz said LNG Canada would be competitive with projects in the U.S. Gulf Coast, Qatar and Australia in terms of the extent of the gas resources and the cost of the fuel delivered to key Asian markets. It would also have the lowest greenhouse gas emissions per unit of output of any LNG facility in the world.

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Canada could become a major source of LNG given its strong competitive position, said economist Jackie Forrest of Calgary-based Arc Energy Research Institute.

“LNG from Canada is cheaper than supply from the U.S., and cheaper than Australia,” Ms. Forrest told the conference. “If Canada could get more regulatory certainty, there would be a greater opportunity for LNG.”

Western Canadian gas producers are eager to get access to new markets as they face continuing competitive pressure from the United States.

Painted Pony Energy Ltd. has some of the largest reserves of natural gas in the prolific Montney fields of northeastern B.C. It has developed new customers for its gas beyond Alberta, but is eager to see LNG Canada’s facility completed and other companies approve export projects, its chief executive Patrick Ward said.

Chevron Corp. and Australia’s Woodside Energy Ltd. applied earlier this month for a new licence to nearly double the size of their proposed LNG plant in Kitimat. The companies have not said when they would make a final investment decision.

The United States has been Canada’s sole export market for natural gas but is experiencing booming production from massive shale deposits in Pennsylvania, Texas and other states. “We have to find new markets for our exports,” Mr. Ward said.

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Environmental groups warn that growing gas production and LNG processing will drive up greenhouse gas emissions in B.C. and make it more difficult for the province and the country to meet international commitments to reduce carbon emissions.

Mr. Calitz said the LNG Canada gas will displace coal-fired power in China, with the resulting decline in global GHGs equivalent to B.C.’s entire emissions output.

Editor’s note: An earlier version of this story incorrectly stated that Petronas was based in Indonesia. The company is based in Malaysia.
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