A dark environmental forecast is being countered by a move to brighten the commercial outlook for the all Asian-owned bid to launch overseas shipments of liquefied natural gas (LNG) from the northern Pacific Coast of British Columbia (BC).
At the same time that the Canadian Environmental Assessment Agency (CEAA) rendered a negative verdict on project greenhouse gas (GHG) emissions, Pacific NorthWest LNG applied for a super-long, 40-year export license from the National Energy Board (NEB).
The time extension — up 15 years from the project’s current permit — is meant to add supply security value to Canadian gas for the Pacific NorthWest group, which includes Malaysian state energy conglomerate Petronas operating as wholly-owned Calgary subsidiary Progress Energy (lead partner with a 62% interest), Sinopec (15%), Japex (10%), IndianOil (10%) and Petroleum Brunei (3%) (see Daily GPI, Oct. 27, 2015).
No environmental assessments are needed to obtain NEB long-term export licenses. LNG terminal projects ordinarily aim to evolve gas supply portfolios. Drilling, processing and pipeline sources develop separately, largely under provincial jurisdiction.
The CEAA figures in the Pacific NorthWest scheme because the commercial structure includes upstream exploration and production of all its gas from its own leases in the Montney Shale formation straddling northern BC and Alberta.
After months of study and hearings, the CEAA issued a draft final impact report that the Asian group’s proposed Prince Rupert export terminal for up to 3 Bcf/d would cause “significant” greenhouse gas emissions.
As a gas-fuelled refrigeration site the terminal would emit 5.28 million tonnes of carbon dioxide per year, CEAA said. Upstream exploration, production and pipelines would emit another 6.5-8.7 million tonnes, the draft assessment said.
The terminal projections add up to “a marked increase of greenhouse gas emissions both at the provincial (8.5%) and national (0.75%) levels,” the report says. The upstream emissions would add another 10-14% to BC emissions and 0.9-1.2% to Canada’s national total, CEAA said.
The draft assessment is in a formal public reply stage. CEAA acknowledges that evolving federal and provincial environmental regulation, potentially affecting every source of greenhouse gas emissions, could change or offset the outlook. But the agency also points out that new principles to guide federal cabinet ratification of CEAA and NEB decisions, require the government in Ottawa to take climate change policy effects fully into account.
Pacific NorthWest LNG is the first project affected by the ratification rules that the four-month old Liberal government announced in January, giving supporters and opponents an open field for speculation on the eventual outcome. Like the Democrats in the United States, Canadian Liberals are trying to set themselves apart as both more environmentally virtuous than their opponents but also stronger supporters of economic growth and job creation.
Pacific NorthWest has pledged to make a final commitment to start construction as early as this spring if complete regulatory requirements turn out to avoid creating prohibitive costs. The BC legislature ratified a favorable royalty and tax regime last summer.
A precedent for super-long gas export licenses has been set. The NEB granted Canada’s first 40-year permit in January to the LNG Canada proposal to ship out up to 3.7 Bcf/d, but no firm target dates for construction or deliveries have been set by sponsors Shell Canada, PetroChina, Korea Gas and Mitsubishi.
The 40-year gas export permits were created last year by federal legislation that responded to industry requests to enhance the overseas appeal of Canadian gas with a regulatory regime that clearly refrains from interfering with projects for their full life spans.
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