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Another BC LNG Project Launched by Industry Newcomer, with Aboriginal Support

An industry newcomer has launched the biggest proposal yet for liquefied natural gas (LNG) exports from the Pacific coast of British Columbia (BC), with Aboriginal support for a projected C$30 billion (US$27 billion) chain of plants.

Steelhead LNG Corp. filed applications to the National Energy Board (NEB) for 25-year licenses to ship overseas 45 Tcf from five terminals envisioned for a location at Port Alberni on the west side of Vancouver Island.

"The site is a significant distance from upstream gas production," CEO Nigel Kuzemko said in announcing the filings that call for tanker loadings to climb to 4.25 Bcf/d. The nearest wells are more than 1,000 kilometers (600 miles) away to the northeast. No pipeline with capacity approaching the forecast export total reaches the spot.

The last attempt to build a modest, second subsea gas utility pipeline to the sparsely populated island from the mainland failed in 2004. Privately owned Steelhead and the Aboriginal community at Port Alberni, the Huu-ay-aht First Nations, announced an agreement to cooperate on LNG planning. Local consent is billed as a big competitive advantage in BC, which is notorious for native and environmental resistance to industrial projects.

"This agreement represents only the first step in our journey together," said Kuzemko. "We recognize that between now and the time the first shipment of LNG might leave our proposed facility, thousands of decisions will have to be made and we have to get every one of them right, or that shipment doesn't leave."

The natives said their part of the journey includes reaping benefits from jobs to improved roads. Vancouver Island was first connected to the BC gas grid in 1991 by a hotly contested subsea pipeline. About C$150 million ($135 million) in government grants and loans covered half the costs of construction by Westcoast Energy (now Spectra Energy) and Alberta Energy Co. (now Encana Corp.).

In 2004, Williams and BC Hydro scrapped a plan for a second seabed gas connection between the island and the mainland called Georgia Strait Crossing (GSX) (see Daily GPIDec. 27, 2004). The industry partners said the scheme turned out to be uneconomic. The project cancellation followed a years-long fight with environmentalists and a critical review of associated plans for gas-fired power plants by the BC Utilities Commission. Instead of a new pipeline, island gas distributor FortisBC erected a thermos-shaped, 12-story storage vessel for LNG as a backup supply for periods of peak demand.

In the new NEB applications, Steelhead did not identify gas supply sources, overseas customers or pipeline projects that would turn its grand LNG design from a vision on financial and regulatory paper into a going concern. Steelhead LNG is the 13th LNG export terminal scheme sited on the BC coast that has applied for long export licenses from the NEB (see Daily GPIJuly 3). Another three LNG projects seek to use Canadian gas to break into the global trade, including two Oregon coast terminals that plan to use BC production and a Nova Scotia project planning Atlantic tanker sailings.

Two more terminals are in earlier planning stages: conversion of Repsol SA's Canaport operation in New Brunswick from an import to an export site, partly using U.S.-sourced gas (see Daily GPIJan. 2); and an Alberta inland LNG plant proposed as an anchor tenant for an industrial park proposed by an Edmonton civic economic development agency and prospective Chinese investors (see Daily GPIJune 25).

None of the Canadian LNG projects have disclosed overseas sales contracts, started construction or set firm dates for work to advance beyond planning and regulatory stages.

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