Varcoe: As energy export developments approach starting gate, Canada must unshackle big projects

For Canada, more projects — and more big decisions — are coming on the LNG front

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It’s a major export project that seems like a natural fit for Canada.

Take a natural resource that’s stuck in an oversupplied North American market and find a way to move it to customers around the world, where it can fetch a higher price.

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By the end of June, Calgary-based AltaGas and its partner Royal Vopak are expected to make a final investment decision on the proposed Ridley Island Energy Export Facility near Prince Rupert, B.C.

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If approved, the West Coast terminal could export up to 60,000 barrels per day of liquefied petroleum gases (propane and butane) from Western Canada to customers in Asia.

The project, estimated to cost in the $1-billion ballpark to complete, is being developed on land administered by the Prince Rupert Port Authority.

Critically, it has key federal and provincial permits in place, following a five-year environmental preparation and review process.

“It’s a game-changer for us because with the dock, we will have the ability to expand our export capacity there by up to 10-fold,” AltaGas CEO Vern Yu said in an interview.

“The key that we found is that we have great support in Prince Rupert from the community, we have great support with the First Nations . . . and because it’s a site-specific project, it is harder for opposition to shut down than a pipeline.”

Getting support to build other major developments in Canada has proven elusive.

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Think about failed proposals from the past decade: Northern Gateway, Energy East, Énérgie Saguenay or the Frontier Oilsands Mine.

Energy projects that have gone ahead, such as the Trans Mountain expansion, have often been over budget due to delays.

The difficulty of completing large projects in the country extends into other areas, including transmission lines, power generation and mining, said Heather Exner-Pirot, director of natural resources, energy and environment at the Macdonald-Laurier Institute.

The one certainty in the approval process is “it will be difficult to get projects done in Canada,” she said.

“I would say it is an adversarial regulatory process. And the process in Canada now is we’re almost looking for reasons to say no to projects.”

For Canada, more projects — and more big decisions — are coming on the LNG front.

LNG
The LNG Canada export terminal in Kitimat, B.C. Photo by Darryl Dyck /Postmedia Network

After years of debate and disappointment — there were 24 separate developments pitched at one point last decade — only one large project is being built.

LNG Canada is expected to begin operating within a year, while the smaller Woodfibre LNG is also moving ahead.

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Federal support for more LNG projects has been, at best, tepid, given the increases in emissions that come with new gas development and export facilities, and growing climate concerns.

Project proponents point out that Canadian gas exports could displace higher-emitting energy sources, such as coal, used to generate power in other countries.

There is plenty of potential to expand LNG in Canada, and the world will require more super-chilled natural gas, Rystad Energy vice-president Emily McClain said Thursday.

Speaking at a Rystad conference in Calgary, McClain projected that Canada’s LNG export capacity will grow to six billion cubic feet (bcf) per day by 2035.

The sharp increase would come from the startup of LNG Canada — and a second phase going forward — the completion of Woodfibre, along with the proposed Cedar LNG, Ksi Lisims and Tilbury LNG developments on the B.C. coast.

Most of those projects still require a final investment decision.

The Woodfibre LNG site
The Woodfibre LNG site is seen on Howe Sound as work continues to prepare for construction, in Squamish, B.C., Wednesday, July 5, 2023. Darryl Dyck/The Canadian Press

“As we know in Canada, LNG projects have faced significant regulatory hurdles, a lot of cancellations, projects being placed on hold — but we do see a lot of opportunity here in Canada,” McClain told the audience.

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In its favour, Canada has ample supplies of low-cost gas and it can offer a shorter shipping time to move LNG to Asia than from terminals on the U.S. Gulf Coast.

“In Canada, we are seeing a lot of momentum now,” McClain said in an interview.

“Is the risk still there? Absolutely.”

The total value of natural resource projects across Canada — including energy, forestry and mining — being developed or planned has dropped from $711 billion nine years ago to $573 billion last year, noted Exner-Pirot, who is also special adviser to the Business Council of Canada.

Not all projects have been stymied.

In Alberta, a $1.6-billion net-zero hydrogen energy complex is being built by Air Products in Edmonton, while Dow’s $9-billion net-zero petrochemical project is progressing.

Chrystia Freeland touring a hydrogen production facility operated by Air Products in Alberta
Deputy Prime Minister Chrystia Freeland, centre, toured a hydrogen production facility in Alberta operated by Air Products in August 2022. Postmedia/File photo

Federal Finance Minister Chrystia Freeland and Natural Resources Minister Jonathan Wilkinson have also spoken out about the need to fast-track necessary projects, such as for critical minerals and clean electricity.

“We have a problem. And it’s especially around these linear projects that fall under multiple jurisdictions,” said Jackie Forrest, executive director of ARC Energy Research Institute.

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“The other big issue is the uncertainty for the investors. The longer these projects take in the approval process . . . the higher the risk.”

At AltaGas, Yu estimates Canada produces about 350,000 bpd of propane and butane today that need to be exported. With more drilling in Western Canada to fill up planned LNG projects, that will increase in the years ahead.

“We can add anywhere from $4 to $10 a barrel of value for our customers by getting them to a premium market. The incremental barrels of propane and butane in Canada have to be exported,” he said.

“We are having very good, robust discussions with our customers and there seems to be strong commercial interest to get that done.”

Chris Varcoe is a Calgary Herald columnist.

[email protected]

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