AltaGas announced last week that it would not develop its Douglas Channel LNG plant near Kitimat, British Columbia. Failure to secure offtake agreements, low gas prices and other economic challenges were cited as the reasons behind the company’s decision.
This development, which came shortly after Royal Dutch Shell said it was delaying its final investment decision (FID) on a separate LNG project in BC, comes as another blow to BC’s hopes of becoming a gas exporter this decade.
AltaGas’ CEO, David Cornhill, said during a conference call that the AltaGas-led consortium managing the project had been unsuccessful in its efforts to negotiate sales contracts for the export of gas, even though the company believed it could have delivered LNG to Japan at competitive prices. In co-operation with its partners Idemitsu Kosan, EDF Trading and Exmar, AltaGas had planned to start exporting LNG from Douglas Channel in 2018.
BC Minister Natural Gas Development Rich Coleman said AltaGas’ decision was not indicative of an industry in trouble. “I don’t think so,” Coleman said. “I think we’ve got some significant FID discussions taking place in the next 60-90 days on a couple of projects. Obviously there’s been two that have told us they want to get to their FID by end of this year, and they’re much larger. This is a very small project.”
Indeed, Douglas Channel LNG’s export potential amounted to roughly 2.4 billion cubic metres per year of gas compared with a capacity of 33 bcm at Shell’s LNG Canada project.
The US and Australia are anticipated to benefit from the delays to BC-based LNG projects getting off the ground as they proceed with their own LNG export developments.
“The world isn’t going to wait on Canada and BC,” said a Macdonald-Laurier Institute senior fellow, Philip Cross, in early February. “While we haven’t been approaching this with a sense of urgency, other countries have been. Australia is building terminals left and right, [and] the United States seems to be able to put these plans into effect a lot more efficiently than we are.”