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LNG Canada CEO hopes to break ground on $40-billion B.C. project in 2018

A truck drives past LNG Canada signage in Kitimat, B.C. Low oil prices crimped the revenue of major firms such as Shell in 2016, and that in turn delayed a variety of energy proposals. Oil prices, however, have risen sharply over the past year while fears of a global LNG glut have eased.

Ben Nelms/Bloomberg

The chief executive officer of LNG Canada says conditions are ripe for the consortium to start building a liquefied natural gas project in British Columbia by the end of this year.

Andy Calitz said on Tuesday that the group, led by Royal Dutch Shell PLC, has been making steady progress in the 22 months since plans were suspended to construct an export terminal in Kitimat. In July, 2016, LNG Canada announced a delay in making its final investment decision (FID) – a blow to British Columbia’s LNG dreams.

A wide range of stakeholders such as equipment suppliers, engineering consultants, Indigenous leaders and local mayors have been avidly following LNG Canada’s efforts to rebound from the setback in the summer of 2016. “At that time when they asked the inevitable question, ‘When will you reconsider an FID?,’ our answer was, ‘We will be in construction in 2018.’ I reaffirm that commitment today,” Mr. Calitz said during the Canada Gas and LNG conference in Vancouver.

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He said Shell and its three partners in LNG Canada are keen on exporting from Kitimat to Asian markets. Low oil prices crimped the revenue of major firms such as Shell in 2016, and that in turn delayed a variety of energy proposals. Oil prices, however, have risen sharply over the past year while fears of a global LNG glut have eased.

“External market conditions in terms of oil prices, free cash flow, energy prices and just the supply-demand balance didn’t make sense in July, 2016,” Mr. Calitz said.

The BC Liberals, under Christy Clark, aggressively promoted the potential of LNG wealth and prosperity in the 2013 election, boasting that exports of the fuel would transform the provincial economy with the creation of 100,000 jobs.

But today, no LNG project is under construction in British Columbia, despite energy companies unveiling more than 20 proposals in the province from 2011 to 2015.

Mr. Calitz welcomed the BC NDP minority government’s incentives designed to spur LNG development and added that he is optimistic about gaining tariff relief from the federal government.

Slashing costs such as federal anti-dumping duties on imported fabricated industrial steel components will figure prominently in whether the Kitimat proposal is deemed attractive enough to approve, industry analysts caution.

Susannah Pierce, director of external relations at LNG Canada, said discussions are going smoothly with the federal Finance Department over how to resolve the issue of anti-dumping duties of up to 45.8 per cent on imports of steel components, primarily targeted at China and South Korea.

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“We have confidence in our position and believe the facts speak for themselves. Large, complex modules cannot be constructed in Canada, as we have demonstrated throughout the trade remedy process to date,” Ms. Pierce said in a statement. “We also feel confident that government will recognize the importance of LNG and investments like ours that support Indigenous opportunities, while providing an important resource for a lower carbon economy.”

LNG Canada forecasts that it will cost up to $40-billion to construct the Kitimat terminal and related infrastructure, but that doesn’t factor in import tariffs.

The NDP government, led by Premier John Horgan, has been supportive of the two B.C. projects seen by industry experts as having the best chance of becoming reality: LNG Canada in Kitimat and Woodfibre LNG, which hopes to build a terminal near Squamish.

In March, Mr. Horgan unveiled measures designed to reduce risks for LNG proponents in the province, notably by providing sales-tax relief for construction and eliminating specific income tax on the industry.

While BC Green Leader Andrew Weaver opposes LNG exports from the West Coast, he has said he will give the NDP until the fall to explain how the provincial government would balance the pursuit of LNG with efforts to reduce greenhouse-gas emissions.

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