Friday, February 12, 2016

Northeast BC Outlook, Fort St. John & Dawson Creek

On my recent visit to Northeast BC I was exposed to cities that are preparing for something bigger. Obviously going from Metro Vancouver or if you're coming from Calgary or Edmonton both cities don't measure up but what you do notice, is a lot construction, Highway improvements and you sense that most people are doing well financially. You see somewhat big name brands starting to establish a presence in the area, from new Hotels such as Best Western Plus being constructed and scheduled to be ready for November 2016, to Restaurants like Brown's Socialhouse, Original Joe's and Bosa Properties renovating the Dawson Creek Mall and so the list goes on. 

The announcements made over the last few months continue to grow and prove that it’s a matter of WHEN and not IF. The year 2016 will be an important time for the BC LNG industry as it's no surprise the current state of the oil and gas industry is weak, so I wanted to share some facts surrounding these projects.

There are currently 21 proposed Liquefied Natural Gas projects for British Columbia.

The 2 most notable projects are Pacific North West LNG (Petronas) and LNG Canada (Shell), which may reach final investment decisions (FID) in 2016. Combined the capital investment for both of these projects totals $76,000,000,000.

Pacific North West LNG (Petronas) - $36 billion

-          Last year, it announced a conditional final investment decision. One of the two conditions – a project development agreement with the province on taxes androyalties – has been ticked off
-          But one remains outstanding – an environmentalcertificate from Environmental Assessment Agency (CEAA)
-          That approval has been delayed by environmental concerns over the potential impact on salmon rearing eelgrass beds from a trestle and suspension bridge that would pipe LNG to a loading terminal off Flora Bank.
-          “With respect to all other valued components, the agency concludes that the project is not likely to cause significant adverse environmental effects taking into account the implementation of the key mitigation measures”  

LNG Canada (Royal Dutch Shell) - $40 billion

-          At a recent address to the Vancouver Board of Trade, LNG Canada CEO Andy Calitz said the consortium Shell leads is still on track to make a final investment decision in 2016.
-          Despite the delay, LNG Canada CEO Andy Calitz said he remains optimistic. “LNG Canada is in great shape as a project,” he said, adding that the co-owners chose to make a final investment decision in the fourth quarter of 2016.
-          LNG Canada already has all of its provincial and federal environmental approvals, not to mention the support of key First Nations, notably the Haisla.
-          Christie Clark said LNG Canada is well positioned. “I was pleased to see that Shell has reconfirmed its intention to make a final investment decision this year. Even in these uncertain times, which have affected their timeline, they’ve reconfirmed that they want to go ahead with this project,” she said.

B.C. Minister of Natural Gas 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, worth an estimated $860-million near Dawson Creek began in October of 2015. The plant, the largest built in Western Canada in the last 30 years, will deliver 400 million cubic feet of gas per day to TransCanada's Nova Gas Transmission Line, with completion slated for 2017. Also construction on another plant of similar size, worth $715-million, near Fort St. John is expected to begin this year.

As you can see, since my first discussion on Northeast BC there have been a lot of positive announcements regarding the region and the industries they rely on. I think the most important factor for BC, and rightfully so is to ensure the environment and nature is not harmed in a way that is irreversible. Most people enjoy and live in BC for its Super Natural setting and we do owe it to our children and future generations to keep it that way. I believe the BC Government and Canada Government are ensuring that these companies, which will benefit from our natural resources’, also make it a top priority to protect and ensure the environment is able to thrive now and once these companies exit the sites. Saying that I don’t think we should stopping these companies and the economic benefits they provide as long as they are responsible in all areas of what they are doing. The Economic Benefits are enormous for our province and country and cannot be ignored or pushed away. Funding can be established for better Healthcare, Education, improving and maintaining infrastructure, etc... Stay tuned as we follow the progress of B.C.’s LNG export industry throughout what should prove to be an eventful year.

Northeast BC Investment

Seminars & Events
Visit Fort St. John & Dawson Creek

Interview with CBC Radio regarding Northeast BC (Audio)