Coastal GasLink, LNG Canada sign agreement ahead of potential second phase

Pipeline operator TC Energy announced on March 23 that its Coastal GasLink unit had entered into commercial agreements with LNG Canada. According to the announcement, this represents a significant step towards advancing Coastal GasLink Phase 2. This, in turn, would support the development of Phase 2 of the LNG Canada export project.

The Coastal GasLink carries natural gas from northeastern British Columbia to the LNG Canada terminal on the province’s coast over a distance of 416 miles (670 km). The pipeline has the capacity to carry 2.1bn cubic feet (59.5mn cubic metres) per day of gas and if Phase 2 proceeds, capacity would be more than doubled to 5 bcf (141.6 mcm) per day.

“Doubling the transmission of natural gas through the existing pipeline will help further strengthen Canada’s role as a reliable supplier to global LNG markets,” stated TC Energy’s president and CEO, François Poirier. “Increasing LNG exports presents an extraordinary opportunity to transform our economy and establish our country as the number one LNG exporter to Asia.”

According to the announcement, Coastal GasLink and LNG Canada will now further advance definitive cost and schedule estimates for Phase 2 of the pipeline. TC Energy noted that if it proceeds, Phase 2 would have its facilities constructed under a new execution model involving both LNG Canada and Coastal GasLink. LNG Canada would lead project construction as the Phase 2 execution manager, while Coastal GasLink would provide LNG Canada with technical advisory services. This commercial structure includes limits on Coastal GasLink’s capital commitments and overall liability for construction cost and schedule risks, TC Energy noted, saying this was in line with its strategic objectives of reducing such risks.

Phase 2 of the pipeline remains subject to a final investment decision (FID) by the LNG Canada consortium as well as approvals by Coastal GasLink. However, TC Energy said the agreements entered into establish a “comprehensive commercial framework that supports LNG Canada’s pathway to FID”, including front-end engineering and design (FEED) and the execution activities that would follow.

A second phase of the LNG Canada project is on Canadian Prime Minister Mark Carney’s list of major projects of national importance that will be considered for federal support via regulatory fast-tracking.

This week, BC Minister of Energy and Climate Solutions Adrian Dix described the Coastal GasLink deal as “one more necessary step” towards also making LNG Canada’s second phase a reality, according to the Canadian Press.

Separately, speaking at the CERAWeek by S&P Global conference in Houston this week, Poirier said the disruptions to LNG supply caused by the war in Iran increased the likelihood of LNG Canada Phase 2 going ahead. While he added that he was not privy to LNG Canada operator Shell’s decision-making process on Phase 2 or that of Shell’s consortium partners, Poirier told Reuters that they had pushed TC Energy to “be ready”.