Singapore's Pacific Oil & Gas boosts Woodfibre LNG project in Squamish

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      A low-key 11-year-old Singapore firm has emerged as the surprise leader in a crowded field of established global giants racing to export liquefied natural gas (LNG) from B.C. to Asia.

      While the likes of Chevron, Shell, BG, ExxonMobil, CNOOC, and PETRONAS dominate the headlines, Pacific Oil & Gas is quietly on course to make the all-important final investment decision (FID) to sanction construction of its LNG project in southern B.C.’s Squamish district. Its planned first-quarter 2017 start-up puts it ahead of the dozen or so competing projects, all located near the northern B.C. ports of Prince Rupert and Kitimat.

      In an interview in Singapore, president Ratnesh Bedi told the Georgia Straight that he expects the company’s Canadian subsidiary, Woodfibre LNG Export Pte. Ltd., to meet its “soft” FID target for the $1.7-billion project by the fall of 2014.

      Pacific Oil & Gas only came into reckoning in early 2013, when it acquired an abandoned pulp mill 75 kilometres north of Vancouver as the unlikely site for its pioneering cross-Pacific venture. Licensed to export a small annual volume of 2.1 million tonnes of LNG, the project is undergoing community-consultation and environmental-approval processes as well as further technical studies by B.C. energy-utility firm FortisBC.

      A soft FID alone will likely inject the first wave of hundreds of millions of dollars into the local economy.

      “We will be making down payments for equipment worth hundreds of millions of dollars…[accompanied by] some manpower hiring,” Bedi said.

      A “hard” FID would give the green light to full-scale financing and construction and turn Squamish into a gas-trading hub located between Vancouver and Whistler. The 123-kilometre-long corridor connecting the three cities could emerge as an important growth centre for the province, with its future increasingly tied to the rising economies across the Pacific Ocean.

      The B.C. government needs this first project to prove its LNG strategy, which Premier Christy Clark says will add $1 trillion to the provincial economy, create 100,000 jobs, and eliminate its estimated $60-billion debt. Voters bought her LNG vision in reelecting her government last May.

      Although some Canadians reject (because of environmental concerns) a shale-gas-based economic boom and the Clark government has likely overstated LNG’s promise, there is little doubt that the Woodfibre project has quiet but strong local support.

      The Squamish economy touched a low point in 2006 when Western Forest Products closed the mill at Woodfibre. The site remained idle until an unknown company from half the planet away acquired it for $25.5 million in early 2013 with an outrageous idea to turn it into an LNG-export plant.

      “I think that there are some real positives for Squamish,” Mayor Rob Kirkham said by phone on March 3, citing creation of local jobs for a district where many families have a member who must travel long distances to work.

      Kirkham also said the project would bring the opportunity to clean up a contaminated site and furnish tax income for a community now overly dependent on private homeowners. “It would be put in use for what it is zoned for [industrial], and it would generate tax revenue for the district.” (When it shut down, the mill was contributing about $2 million annually in property taxes to the municipality.)

      As well, the mayor added, “It would be an opportunity to get some [local] skills training.”

      To be sure, the project must still clear provincial and federal environmental approvals that could take up to 18 months to achieve, Bedi said in his 50th-floor office overlooking Singapore’s financial district.

      At the company’s community meetings with aboriginal, environmental, residential, and business groups, local groups have voiced concerns about issues like pollution, emissions, taxation, and shipping traffic.

      “While there are no guarantees in any environmental-assessment process, we are confident that the certificates will be received with necessary conditions to ensure proper protection of the local environment,” Bedi said. “Once that is complete, FortisBC will begin construction.”

      In preparation for the project’s launch, Woodfibre LNG has hired Anthony Gelotti—whose 30-plus years in the industry include experience with Shell and Chevron—as its president and expects to double its staff size to 30 by the end of this year.

      In an industry notorious for delays and cancellations, the Woodfibre LNG project has progressed rapidly on account of three factors.

      While its rivals are owned by consortia of shareholders and partners with differing views and risk profiles, Pacific Oil & Gas is controlled by one person: Indonesian tycoon Sukanto Tanoto.

      Secondly, shareholders in the other LNG projects are increasingly worried about rising costs, shifting corporate priorities, tax issues, and the province’s infrastructure and skills deficits.

      Most carry a hefty price tag of more than $10 billion, with the latest proposal by CNOOC’s Nexen expected to exceed $20 billion. Shell’s new cost-cutting CEO is taking a second look at its proposed joint $12-billion to $15-billion investment in a Kitimat plant with three Asian partners.

      The U.K.’s BG Group is two years from making an FID on its estimated $11-billion project, near Prince Rupert, that will be tied to plans by its joint venture with Canada’s Spectra Energy to build a gas pipeline. Malaysia’s PETRONAS, having sold off a combined 38-percent stake to partners from Japan, Brunei, and India, wants to further pare down its shareholding in the Pacific Northwest LNG project, which includes the construction of a $9-billion to $11-billion plant near Prince Rupert by 2018.

      And a Chevron-Apache venture is also aiming to start up its Kitimat plant sometime between 2018 and 2020.

      Woodfibre’s single-minded focus on building a relatively small plant has helped speed up its decision-making to choosing between a floating and a land-based terminal.

      “Around the time of the soft FID, we anticipate to have made a decision on [either] a floating or a land-based LNG,” Bedi revealed. “The technical study will be due in October 2014.”

      Meanwhile, the other projects’ shareholders must compete for access to huge reserves of natural gas and pipeline capacity, long-term contracts with Asian customers opposed to paying high prices, and contractors and skilled labour in population-scarce northern B.C.

      Thirdly, Woodfibre’s biggest advantage is perhaps Tanoto’s decision to launch its project from a decades-old 86-hectare industrial site that the other players probably overlooked. It came with an established pipeline system, electricity and gas supplies, and a sheltered port that can all be converted, upgraded, and expanded to handle LNG. Its proximity to Vancouver and Whistler is a bonus for attracting workers.

      After buying the site, the Vancouver-based company commissioned FortisBC to study the expansion of the existing 600-kilometre pipeline network serving the plant. Completed last December, the study supported the construction of a 52-kilometre pipeline to carry an additional 220 million standard cubic feet per day of natural gas, all for export. This could mean up to 40 annual tanker shipments, sufficient to support the project’s viability but small enough not to strain the reserves and supplies of producers already linked to the main pipeline.

      The B.C. government probably had the Woodfibre project in mind when its latest budget announcement revealed that it expects only one plant to be built by 2017.

      With an eye on this year’s Chinese zodiac symbol, the premier will be desperate for the Woodfibre dark horse to quickly cross the FID line and, hopefully, launch the province’s LNG era.

      Ng Weng Hoong is a Vancouver-based energy journalist with more than three decades of experience covering the industry in Asia and the Middle East.

      Comments

      21 Comments

      W2 Media

      Mar 5, 2014 at 3:43pm

      Thanks for covering this Charlie and Ng Weng Hoong!

      Here's a conversation on the risks of the #LNG export plant in #Woodfibre Howe Sound / #Squamish, with Ruth Simons, Future of Howe Sound Society @FHSSociety. To hear it fast-forward to 0:36:00 for the interview from our Dec 24, 2013 broadcast W2 Media Mornings on Vancouver's Co-op Radio 100.5 FM http://www.coopradio.org/content/media-mornings-316

      JGoodwin

      Mar 6, 2014 at 7:18pm

      This coverage is very one-sided. Residents are very concerned about this project and you have glossed it over with one small mention.

      0 0Rating: 0

      Lauren Miller

      Mar 6, 2014 at 9:03pm

      "...there is little doubt that the Woodfibre project has quiet but strong local support."
      A results from a poll in Squamish's local newpaper:
      Fully supportive - 23%
      Mostly supportive - 8%
      On the fence - 9%
      Strongly Opposed - 61%

      Airbear

      Mar 7, 2014 at 8:42am

      Howe Sound is a refuge for sensitive humpback whales to relax after a strenuous migration across 4000 km pacific strech. Orcas and dolphins are also at home in these waters. With the energy cronies and deaf liberals efforts to market the saftey and benefit of tankers in Howe Sound, the public is being mislead time after time in opposing their only feedback of disapproval. Do your part to petition against the power of corporations, government, and trade. You will be helping the climate, water, animals, and people.

      Luisa Nitrato Izzo

      Mar 7, 2014 at 9:43am

      This piece breaks a number of the cardinal rules of journalism. It is poorly researched, factually incorrect on the key issues (local jobs, taxes, local support for the project), biased and misleading. To claim that "the Woodfibre project has quiet but strong local support" is simply not true. As another reader has already commented, the latest poll shows that a large majority of residents are strongly opposed to the project, and Squamish Council has received a record number of letters expressing their opposition to the project. On local jobs: WLNG claims it will create 100 jobs at most, representing less than 1% of the Squamish population. Since many of those 100 jobs will be highly specialized, is also unclear at this point whether the local workforce will have the right skills to fill them. On local taxes: These are likely to be negligible. Following Mike de Jong's latest budget on Feb 18, the BC government announced its intention to give LNG projects considerable tax breaks by capping municipal industrial property taxes. One District of Squamish Councillor estimated that WLNG's total tax contribution could be as low as $2 million per year, which averages at a mere $111 per man, woman and child in Squamish.

      The disadvantages of this project are many, both on an environmental and economic scale: toxic emissions, potentially deadly explosions in the Sound, long-lasting environmental damage to the surrounding land and ocean, health concerns for the people of Squamish and other Howe Sound communities, negative visual impact (flares at night, ugly floating barge, enormous LNG tankers heading through the Sound every year), falling real estate prices, damage to local businesses (especially in the downtown area), loss of revenue for local tourism companies and backcountry adventure outfitters, impact on local sports enthusiasts (kite surfers, mountain bikers, climbers, etc.), plus the real possibility that the bottom will fall out of the LNG market as BC’s competitors (e.g. Russia and Australia) beat us to it and China develops its own LNG facilities. Not to mention the appalling human rights and environmental record of its parent company, which has made its billions from deforestation (palm oil), pulp and paper.

      Chris Laundy

      Mar 7, 2014 at 11:11am

      Wrong!! This piece in no way represents the views of the people of Squamish. Christy Clark's government is gambling with our financial future in a low down, underhanded attempt to preserve her suspect political career. The economics of BC's LNG boom are utterly bogus and when the bottom drops out of the LNG market, it's going to be left to BC taxpayers to clean up the mess. She claimed a few months ago that she was elected on an energy mandate. I maintain that she was elected due to Adrian Dix's incompetence and lack of genuine policy. I don't for a moment believe that the citizens of this province are enthusiastic about cleaning up the mess her administration will inevitably leave behind.

      Martin Dunphy

      Mar 7, 2014 at 11:27am

      Luisa:

      Thanks for your comment. I cannot disagree with you about environmental issues or the degree of local support for an LNG project in Howe Sound, but to say this article is "factually incorrect" on the issues of local jobs and taxes is incorrect itself.
      No figures are given for the number of local jobs that may or may not be provided. The quote provided came from the mayor of Squamish and was reported as such.
      And the figure of $2 million in taxes is included in the article itself.

      Kati Palethorpe

      Mar 7, 2014 at 11:33am

      I would like to utter my concerns that this article is very one-sided and does not at all reflect the situation in Squamish. I am a resident of Squamish and I can tell you that there is a huge opposition to this proposed LNG plant. Woodfibre LNG held several information events. I joined 5 of these events. Through these events I learned that there won't be many jobs created for local Squamish people at all, many issues were not addressed by the proponents and way too many questions did not get answered. It was interesting to notice how concerned local people from all over the Sea to Sky corridor are. The proponents have already secretly gone around town paying money (=paying off)to local groups, a poll about LNG online got highjacked after 61% of voters were strongly opposed and the list goes on. These actions surely would not be needed if there was big support for this LNG project in the community. I am surprised about our Mayor's comments, he came to one of the meetings by Woodfibre and he heard and saw how concerned people are, he also learned about the small percentage of jobs that will be created for local people AND he certainly should know that the tax incentive will be not very significant. Several Councillors have already spoken up about these facts or at least have uttered their concerns. Over the past week our District has had to hire a new person to deal with all of the anti-WF-LNG letters they’re getting in. Concerned people have overwhelmed their system. I would like to take this opportunity to invite you and your readers to come and join us for an information event on LNG on the 8th of April @ Quest University in Squamish. It is a free event, childminding will be available, please register.
      Speakers will be:
      Marc Lee, Senior Economist with Canadian Centre for Policy Alternatives
      Jeremy Moorhouse, Senior Analyst with Clean Energy Canada
      Naomi Owens Saulteau First Nations Lands Manager and Biologist
      https://www.eventbrite.ca/e/boom-or-bust-bcs-lng-legacy-registration-107...
      Thank you!

      Luisa Nitrato Izzo

      Mar 7, 2014 at 5:50pm

      Martin Dunphy:

      Thank you for your comments. I beg to differ. To write that "A soft FID alone will likely inject the first wave of hundreds of millions of dollars into the local economy" is factually incorrect and dangerously misleading. I see that it is qualified by the adverb "likely". You are right that there are no figures given for the number of local jobs - only an extremely vague, indirect quote about the "creation of local jobs" made by our very own Mayor, Rob Kirkham, who has yet to provide the community of Squamish with any credible figures to back up his empty rhetoric on the supposed job and tax benefits of this proposal.