B.C.’s LNG Export Industry: 2016 Kick-Off

Anyone following the development of British Columbia’s nascent liquefied natural gas (LNG) export industry will have a lot to watch out for in 2016. According to both government and industry-watchers, two major LNG projects - Pacific NorthWest LNG and LNG Canada – may reach final investment decisions (FID) in 2016.

In June 2015, Petronas-owned Pacific NorthWest LNG announced a positive FID on its proposed export facility on Lelu Island near Prince Rupert, B.C. subject to two conditions. The first condition, approval by the B.C. Legislature of the Project Development Agreement with Pacific NorthWest LNG, was satisfied in July 2015. The second condition, Federal environmental assessment approval, is anticipated to be obtained in 2016. In mid-January 2016, Fisheries and Oceans Canada issued a letter to the Canadian Environmental Assessment Agency indicating that the potential impact of Pacific NorthWest LNG’s proposed suspension bridge and pipeline from Lelu Island to its tanker loading docks would be low.


Unlike Pacific NorthWest LNG, LNG Canada (led by Shell) has yet to announce an FID but in the first week of 2016, became the first LNG proponent to receive a permit from the B.C. Oil and Gas Commission to construct an export facility. Among other things, the permit sets out the environmental and safety requirements for the design, construction and operation of LNG Canada’s Kitimat facility. Within days of receiving its facility permit, LNG Canada also obtained a 40 year export license from the National Energy Board, replacing the 25 year license previously granted for its Kitimat project. LNG Canada’s extended export license must still be approved by the Prime Minister and his Cabinet.

B.C. Natural Gas Minister Rich Coleman has stated that four additional FIDs could be reached in 2016 by two major plants and two smaller plants, bringing the total to six. Douglas Channel, a smaller liquefaction facility located on a barge off the coast of Kitimat, is a likely candidate. However, the Company is currently disputing a 25 per cent excise levy imposed by Customs Canada on the import of its floating terminal which could prevent a 2016 FID if a resolution is not achieved soon. Other potential candidates for 2016 FIDs include the Woodfibre LNG Project near Squamish and the Tilbury LNG Project in Delta.

We cannot underestimate the impact of the global economic climate on the timing and nature of such FIDs (i.e. whether they end up being positive or negative). Recently, certain analysts have suggested that the prospects of B.C.’s LNG industry are grim in light of low oil and gas prices and falling demand. Japan’s move to restart its nuclear reactors is a likely factor contributing to this fall in global demand. However, the long term economic prospects are more optimistic, particularly given the decades-long timelines of most LNG projects. Future demand for LNG may also receive a boost as more countries adopt increasingly stringent environmental policies, particularly in the wake of the 2015 Paris Climate Change Summit, and actively shift away from coal generation. Furthermore, oil prices could turn around rather swiftly, particularly in the event of escalating conflict in the Middle East.

Shifting focus to upstream developments, LNG proponents are continuing to build new gas processing infrastructure in northeast B.C.  Construction on Veresen’s new Sunrise gas processing plant near Dawson Creek began in October of 2015 and construction on another plant of similar size near Fort St. John is expected to begin this year.

Stay tuned as we follow the progress of B.C.’s LNG export industry throughout what should prove to be an eventful year.



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