Just a little over a year after LNG Canada shipped its first cargo of liquefied natural gas from Kitimat, LNG Canada has announced a final investment decision on a Phase 2 expansion.
LNG Canada confirmed this morning by press release that the five partners in the consortium have taken a final investment decision on the expansion.
“Construction will begin immediately,” said Prime Minister Mark Carney at a press conference in Vancouver today.
In fact, some construction work has already begun on an expansion for the facility’s marine jetty.
Carney said Phase 2 is the first of many major investments his government hopes to see happen in Canada in the coming months and years.
“We have what the world wants,” Carney said. “Canada’s a reliable and trusted partner. We’re building big, building fast and, crucially… building in the right way. And we are just getting started.”
The expansion will double the Kitimat facility’s production and export capacity from 14 million tonnes per annum (mtpa) to 28 million mtpa.
The Major Projects Office pegs the Phase 2 investment at $33 billion, though some of those billions will be spent outside of Canada, as the modules will likely be built in China.
That is $33 billion on top of the $40 billion spent on LNG Canada Phase 1, the Coastal GasLink pipeline and upstream natural gas assets.
Coming as it does after a recent investment summit, in which Canada was signaling it is open for business, the FID on Phase 2 is a positive signal to the international investment community.
Carney noted that Phase 2 was referred to the Major Projects Office one year ago.
“The speed of this project shows that, now, when Canadians want something built, we get it built,” Carney said.
A year ago, there were some questions about future LNG demand. America’s war with Iran, and the energy crisis it triggered, has radically changed the demand picture, with Canada viewed as a reliable energy supplier.
“Recent global events have shown that reliable, diverse sources of energy cannot be taken for granted,” said Shell CEO Wael Sawan.
“LNG Canada has already demonstrated its strategic value by supporting customers in Asia when supplies from the Middle East were disrupted.”
“Phase 2 will create further opportunities to meet rising demand for global LNG, which is expected to grow by around 65% by 2050.”
Shell and its partners have been positioning themselves for this announcement for months. It has long been expected that the FID would be announced this fall.
Earlier this year, LNG Canada and TC Energy announced LNG Canada will assume responsibility for expansions that will be needed for the Coastal GasLink pipeline for the capacity increases that will be needed to supply additional gas to Kitimat.
Earlier this month, Shell closed on the $22 billion acquisition of ARC Resources, one of the biggest natural gas producers in the Montney formation. Securing a gas supply like this was clearly linked to LNG Canada’s expansion plans.
“This announcement confirms that Canada—and B.C.—is back in the business of large-scale energy development,” said Jock Finlayson, chief economist for the Independent Contractors and Business Association (ICBA).
A final investment decision on the $20-billion-plus Ksi Lisims LNG project near Prince Rupert and associated pipeline is also expected by the end of this year.
“As more projects proceed and eventually come-on-line, the LNG sector will make an outsized contribution to the B.C. economy,” Finlayson said.
“Tens of thousands of jobs will be created in the construction sector as this project (and hopefully others) advance. Tens of billions of dollars of annual export earnings will be generated for B.C. (and Canada) as the LNG industry grows its production footprint over time.”
The two LNG projects could be under construction in tandem with another expansion to the Trans Mountain pipeline and Roberts Bank terminal, which means B.C. could experience another mega-project construction boom, as it did over a six-year period when LNG Canada, CGL, TMX and Site C dam were all under construction.
That boom helped buoy B.C.’s economy through an economic downturn that affected the rest of Canada.
“It was a pretty significant driver in why B.C. was one of the leaders of growth during that period,” said Bryan Yu, chief economist for Central 1 Credit Union.
“It’s definitely helpful, especially given that we’re in a pretty soft economic environment right now.”
LNG Canada said the expansion would employ 4,000 workers during peak construction, with another 2,100 employed along CGL building new compressor stations.
Community funding from the first phase provided money for Kitimat to replace an aging bridge and other community benefits, said Kitimat Mayor Phil Germuth.
“Continuing supports such as these will be very crucial as we grow through LNG Canada’s second phase,” he said.
Nelson Bennett’s column appears weekly at Resource Works News. Contact him at [email protected].
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