British Columbia's plan to become a major exporter of liquefied natural gas is facing mounting setbacks as energy companies grapple with weak prices and regulatory uncertainty.
Royal Dutch Shell PLC disclosed on Thursday that the LNG Canada joint venture in northern B.C. is being delayed by about nine months, saying the partners are now aiming to make a final investment decision at the end of 2016 instead of the first quarter.
The weak state of the oil and gas industry is casting doubt on all 20 proposals to export LNG from British Columbia.
The Pacific NorthWest LNG project in the Port of Prince Rupert is at risk of being delayed, too, analysts say. Pacific NorthWest LNG, led by Malaysia's state-owned Petronas, has been undergoing a federal environmental review since April, 2013.
While the Shell-led venture has secured its environmental approvals, Woodfibre LNG near Squamish is waiting approval from the Canadian Environmental Assessment Agency.
Pacific NorthWest LNG and Woodfibre LNG must still address questions from Ottawa about the impact of greenhouse gas emissions from natural gas production at wells in northeast B.C.
"Paralysis by analysis," FirstEnergy Capital Corp. managing director Robert Fitzmartyn said.
As oil and gas companies watch their cash flow evaporate, that in turn is forcing them to scale back capital spending and decide whether to pursue, postpone or cancel projects.
AltaCorp Capital Inc. analyst Dirk Lever said low LNG prices, a looming supply glut globally and opposition from some First Nations leaders are among the reasons it appears that Pacific NorthWest LNG "is now more likely to be postponed."
A Pacific NorthWest LNG official declined to comment on Thursday.
Shell chief executive officer Ben van Beurden announced the LNG Canada delay as the energy giant released its financial results. Shell's fourth-quarter profit slid 56 per cent to $1.8-billion (U.S.).
LNG Canada forecasts that it will need to invest up to $40-billion (Canadian) on construction.
Shell owns 50 per cent of LNG Canada. PetroChina Co. Ltd. holds a 20-per-cent stake while the other Asian partners are Japan's Mitsubishi Corp. and South Korea's Korea Gas Corp., which each have a 15-per-cent interest.
Despite the delay, LNG Canada CEO Andy Calitz said he remains optimistic. "LNG Canada is in great shape as a project," he said, adding that the co-owners chose to make a final investment decision in the fourth quarter of 2016.
"It is their intent today, given how they read the international situation, to do so in good faith," Mr. Calitz said. "The fundamentals of LNG Canada are really sound as a project."
B.C. Premier Christy Clark, in Ottawa on a trade mission, said she is confident that there will not be further delays in the regulatory process. "The federal government has been pretty clear. They've made sure they are maintaining certainty and we're prepared to work with them on that."
Ms. Clark said LNG Canada is well positioned. "I was pleased to see that Shell has reconfirmed its intention to make a final investment decision this year. Even in these uncertain times, which have affected their timeline, they've reconfirmed that they want to go ahead with this project," she said.
Ellis Ross, chief councillor of the Haisla First Nation, said he received assurances from federal Environment Minister Catherine McKenna that the new conditions will not cause delays, but he remains worried.
Mr. Ross, who supports LNG Canada, said the climate change assessment should take into account the fact the LNG from British Columbia would displace diesel or coal in Asia, although Ottawa has said it will look only at emissions at the terminals and where the natural gas is extracted and initially processed.
The Shell-led project appears to be unaffected by the new policy imposed by the federal Liberal government last week.
LNG development "is critical for economic development and for jobs" for the Haisla people, Mr. Ross said.
Matt Horne, the Pembina Institute's associate director for B.C., said the provincial government has imposed tough environmental standards on proposed liquefaction facilities, but has done nothing to reduce greenhouse gas emissions in the upstream from the production of the natural gas needed to feed those plants.