The British Columbia (BC) government has committed C$152 million to the province’s embryonic liquefied natural gas (LNG) export development. The contribution — C$32 million for aboriginal cooperation, and C$120 million to industry for northern infrastructure construction — was billed as a bargain price for tickets to prosperity.

The commitments were made at an LNG conference being staged in Vancouver by the BC Liberal government, which is seeking re-election with a grand design for building a new gas trade with Asia as a cornerstone of its campaign platform. Although the spending was announced with fanfare, both items are modifications of longstanding commitments to support northern BC industrial development.

The industry contribution is an extension of an infrastructure development program that dates back to 2004. The scheme lets gas producers convert costs of building field essentials such as roads and bridges into credits for deduction from future provincial royalties. The aboriginal grant covers native costs of keeping a longstanding agreement on participation in the proposed Pacific Trails Pipeline by 15 communities along the route, organized for the purpose as First Nations (PTP) Group LP (FNLP).

The line is planned as a 290-mile route from north-central BC west to the first in a string of export terminals proposed at Kitimat on the province’s northern Pacific coast, KM LNG. The agreement repeats previous forecasts that the aboriginal members in FNLP will eventually receive about C$200 million in community benefits. But the deal has been amended to grant the natives only a non-equity investment interest in the project.

The original agreement gave FNLP an option to buy 30% ownership. KM LNG was recently restructured, with Chevron Canada Ltd. taking over a half-interest (see NGI, Jan. 7). Apache Canada stayed in the enterprise but agreed to let Chevron take the reins as it is more experienced in global LNG trade. The partnership also owns the Pacific Trails project.

No dates have been set for construction or export deliveries to commence. No entries in the lineup to build facilities for the proposed new Asian trade have landed contracts with overseas customers, although Japanese, South Korean, Malaysian and Chinese industrial corporations are participating in BC development consortiums, including the largest export facility announced to date in North America by an affiliate of Royal Dutch Shell plc (see NGI, Feb. 11; May 21, 2012).

At the Vancouver conference, BC Liberal Premier Christy Clark repeated predictions that the province could develop a C$1 trillion industry on rich but remote northern shale gas deposits. The predictions include a formal political pledge to put up to C$100 billion into a BC Prosperity Fund to be created for provincial royalty and tax revenues from the forecast shale gas boom.

The message from the Canadian industry capital of Calgary, home of BC as well as Alberta gas producers, is that the LNG export bonanza is still far from starting to flow. The message was delivered most clearly by Jim Prentice, a prominent Calgary lawyer who has become vice-chairman of the Canadian Imperial Bank of Commerce after holding the industry and aboriginal affairs portfolios as a senior minister in cabinets of the federal Conservative government in Ottawa.

“This is no slam dunk,” Prentice said. He pointed to competition for Asian customers from a lineup of LNG export proposals in the United States as well as global market mainstays tapping supplies in Australia and the Middle East.

Prentice said, “Canada’s greatest and most important advantage may well be our stability. The critical element in the LNG industry is, and always will be, contractual dependability. The world has a lot of natural gas. What is doesn’t have is an ample supply of reliable, dependable nation states that are capable of fulfilling their contractual obligations over a 50-year period, without potential interruption due to political, legal or territorial conflict. Social, legal and political stability are essential preconditions to the investment of the billions of dollars required for an LNG facility, and frankly, Canada has excelled at providing them.”

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