LNG Canada chief executive officer Andy Calitz in Calgary in 2013.Todd Korol/The Globe and Mail
It seems Andy Calitz didn't get the memo from industry experts about Canada missing the boat on exporting liquefied natural gas to Asia.
Far from giving up, the chief executive officer of LNG Canada believes that it is a matter of when and not if a $40-billion export terminal will be built in Kitimat in northwestern British Columbia. This week, the National Energy Board approved the Royal Dutch Shell PLC-led consortium's request to extend the deadline for when exports must start to Dec. 31, 2027, instead of the end of 2022.
If construction were to begin in late 2018, it would take five years to have the terminal ready for exports to start in late 2023 – too late to satisfy the original expiry date but meeting the new deadline for shipments to commence under the 40-year licence from the NEB.
"I do not subscribe to the view that the growth period for LNG or natural gas is over," Mr. Calitz said in an interview.
Despite the gloomy outlook for LNG proposals worldwide, he is pressing ahead with the legwork required to construct the export terminal on an industrial site in Kitimat. Mr. Calitz has been keeping 110 employees busy with preliminary work on a project that industry observers believe will likely be the last and best chance for a major LNG terminal to be built in Canada.
Energy analysts have written a series of reports over the past couple of years with increasingly pessimistic views on the likelihood of B.C. ever seeing any LNG projects.
Some experts conclude that Canada has already missed its window of opportunity. Mr. Calitz, however, is an unabashed optimist.
First, LNG Canada must select the prime contractor. The deadline for submissions from four bidding groups is Nov. 30, and the selection process should be finished in the second quarter of 2018.
Mr. Calitz said a decision on whether to proceed to the first phase of construction will be made after the prime contractor is chosen. He doesn't have a specific target date for revealing a green or red light for the project, although analysts expect an announcement in the second half of 2018 after Shell and its partners make up their minds.
Analysts had expected LNG Canada to make a final investment decision (FID) by the end of 2016, but amid a global glut of the fuel, the consortium announced a delay in July, 2016.
"The time will soon come for the next FID. Speaking as LNG Canada, I am quite optimistic that it will be us," said Mr. Calitz, who will be delivering a speech on Friday to the Greater Vancouver Board of Trade. His topic will be the leadership challenges in trying to develop a megaproject in British Columbia.
Instead of going into a holding pattern with little activity, LNG Canada has been conducting a comprehensive review of the project and even started dismantling aging infrastructure such as storage tanks on the proposed Kitimat export site where methanol maker Methanex Corp. closed operations in 2006. The site cleanup began in July and is halfway toward completion.
The Shell-led group hopes to find cost savings for construction while also looking for economic signals that the current glut of LNG globally will gradually ease and eventually create an opening for new supplies in the long term.
Shell holds 50 per cent of LNG Canada. South Korea's Kogas and Japan's Mitsubishi Corp. each have a 15-per-cent stake, while PetroChina Co. Ltd. owns a 20-per-cent interest in the consortium.
An industry source said Malaysia's state-owned Petronas wants to join the LNG Canada consortium, but Mr. Calitz declined to comment on whether Petronas might be successful in its quest to acquire a minority interest.
In July, Petronas-led Pacific NorthWest LNG cancelled rival plans to build an export terminal near Prince Rupert, located roughly 200 kilometres west of Kitimat.
"The announced cancellation of the Pacific NorthWest LNG project was both positive and negative for LNG Canada. Let me start with the negative. That announcement strengthened the views of both the critics who say LNG should not happen from British Columbia and the skeptics who say it won't happen," Mr. Calitz said.
On the positive side for LNG Canada, competition for skilled trades is sharply decreased because Pacific NorthWest LNG bowed out, he said. "In the past, we had assumed that there would be more than one energy project under simultaneous construction in British Columbia. The pressure on finding the 19 trades over a period of five years is reduced, and that brings the cost of building the plant down."
Mr. Calitz is well aware of the high stakes, especially for the B.C. economy in general and the Haisla Nation in particular. LNG Canada's terminal site and wharf are located within the Haisla's traditional territory.
"Our delay last year was a bitter disappointment for the Haisla. At the same time, they have remained incredibly supportive," he said.
Crystal Smith, the Haisla's elected chief councillor, said she is holding out hope that LNG Canada will forge ahead and the economic benefits will have far-reaching impacts, including jobs for Indigenous workers. "LNG is the most acceptable product that could be shipped out of our traditional territory. It's still a huge focus for us," she said from Kitamaat Village. The Haisla's traditional home is on the east side of Douglas Channel in Kitamaat Village, located near Kitimat.
In 2015, LNG Canada received environmental assessment approvals provincially and federally.
Brent Jang