Four major B.C. liquefied natural gas projects have created an alliance to co-ordinate community relations and labour strategies in a bid to present a united front in the race to export LNG to Asia.
The fledgling B.C. LNG Developers Alliance is aiming to promote the province's nascent LNG industry and engage in what will be protracted public consultations. An executive search has started to hire a leader who would become the voice of the alliance, and outside consultants will be retained, according to sources familiar with the group's formation.
B.C. LNG proponents, learning lessons after cost overruns that have plagued projects in other countries, are seeking to win support from First Nations and other communities. They also need to prepare themselves for skilled labour shortages, which have often created headaches for energy companies in Canada.
The alliance's four members are: Petronas-led Pacific NorthWest LNG; Shell Canada Energy-led LNG Canada; BG Group PLC's Prince Rupert LNG; and the Kitimat LNG project, which is co-owned by the Canadian units of Chevron Corp. and Apache Corp.
The members will collaborate in areas such as community outreach and labour training, forging bonds to stay on the same page and avoid duplication as they seek to win public support.
Officials from the four members declined comment Tuesday. Three smaller LNG projects are considering joining the group, which would get help from the Canadian Association of Petroleum Producers on issues related to drilling for natural gas.
There are 14 B.C. LNG proposals in the works, but industry experts predict that eventually there will only be four that come to fruition. Although such outright consolidation is not under way right now, some industry discussions have centred around sharing gas pipeline infrastructure instead of competing lines. Combining aspects of certain projects would reap benefits.
British Columbia is seeking to enter the business of exporting natural gas in liquid form, but the province lags LNG developments in other jurisdictions such as Australia, Nigeria, Qatar, Russia and the United States.
Fierce global competition will be among the topics to be discussed when a three-day international LNG conference kicks off Wednesday in Vancouver. A high-profile speaker on the first day will be Shamsul Azhar Abbas, chief executive officer of Malaysia's state-owned Petronas.
The formation of the B.C. LNG Developers Alliance will include plans to build "an LNG literacy program," designed to inform B.C. residents about the industry. Many British Columbians have noted that there was a lack of information in the early stages from Enbridge Inc. and its controversial Northern Gateway oil pipeline proposal, and the alliance wants to avoid such criticisms on the LNG front, sources said.
The LNG alliance will collaborate whenever possible, but members will remain competitors when it comes to developing their respective LNG export terminals and pipeline plans.
British Columbia has received a wake-up call as the United States approves LNG export applications, including one from the Jordan Cove LNG project in Oregon that could be fed with Canadian natural gas, while the province still works to get its fiscal and regulatory house in order.
British Columbia is struggling to ensure that LNG projects deliver benefits to taxpayers, minimize environmental impacts, and address concerns of First Nations and other local communities, while ensuring proponents see a rate of return that justifies the massive investment required, said a KPMG report on global LNG competition released Tuesday. At the same time, buyers need to be convinced the projects can deliver competitively priced gas, with projects that are on time and on budget.
"Buyers need to sanction these projects in order for there to be an LNG industry," KPMG partner Mary Hemmingsen said in an interview. Ms. Hemmingsen has travelled to Asia to meet with prospective buyers and found them determined to insist on project discipline after a series of projects suffered from major cost overruns.
The KPMG expert said British Columbia appears ready to negotiate favourable terms with Petronas-led Pacific NorthWest LNG, the perceived leader in the B.C. race. The Malaysian firm has said it will make a final investment decision by the end of 2014.
As the competition to secure long-term buyers heats up, B.C. Premier Christy Clark faces pressure to reassure the global LNG industry gathering in Vancouver this week that her Liberal government can provide a framework that will support construction of several projects that are already facing challenging economics.