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Pacific NorthWest LNG mulls co-operation with Shell for northern B.C. facilities

Pacific NorthWest LNG, led by Malaysia’s state-owned Petronas, is considering footing the bill to construct the marine terminal in exchange for gaining access to Shell Canada Ltd.’s development rights on Ridley Island and nearby waters.


A liquefied natural gas consortium is exploring ways to build docking facilities off Ridley Island in a move that would require the co-operation of a rival in northern British Columbia.

Pacific NorthWest LNG, led by Malaysia's state-owned Petronas, is considering footing the bill to construct the marine terminal in exchange for gaining access to Shell Canada Ltd.'s development rights on Ridley Island and nearby waters.

Pacific NorthWest LNG's planned liquefaction terminal would still be located on Lelu Island. But if the docking facilities were to be moved away from sensitive habitat for juvenile salmon, the hope of the Petronas-led group is that the project will win near-unanimous support from First Nations leaders who are worried about the environmental impacts under the current dock design.

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British Columbia Deputy Premier Rich Coleman, who is also Minister of Natural Gas Development, said there is merit to building a trestle-supported jetty that leads out to docking facilities for LNG carriers in waters west of Ridley Island instead of having a suspension bridge start at Lelu Island.

That suspension bridge would connect with a jetty and go across the northwest flank of salmon-nurturing Flora Bank – a sandbar that is visible at low tide next to Lelu Island.

"I think that there is some momentum to move the jetty to Ridley if all parties can agree," Mr. Coleman said in an interview in his B.C. Legislature office in Victoria. "There's probably a substantial financial saving."

The Petronas-led group is a competitor to Shell's own export proposal called Prince Rupert LNG, but he said there would be cost savings for both camps if they were to co-operate on shared access to the infrastructure required for LNG carriers to dock.

"There's a benefit for both parties. If Shell on that land in the future wanted to go ahead, a lot of the infrastructure would have been paid by someone else," Mr. Coleman said, referring to a scenario in which Pacific NorthWest LNG picks up the dock tab.

Royal Dutch Shell PLC has placed the Prince Rupert LNG proposal on the back-burner since it inherited the plan through last year's acquisition of BG Group PLC.

Calgary-based Shell, owned by Royal Dutch Shell, is leaving the door open to commercial discussions. "Shell works in partnership with many companies and projects around the world. We are currently in the process of reviewing the combined Shell and BG portfolio, including the Prince Rupert LNG project on Ridley Island," Shell spokesman Cameron Yost said in a statement Thursday from Calgary.

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Separately last July, the Shell-led LNG Canada consortium delayed its decision on whether to proceed with its plans in Kitimat, B.C., located roughly 200 kilometres east of Prince Rupert. LNG Canada has yet to announce a revised timeline, though it is hunting for a prime contractor.

The B.C. Liberal government expects Pacific NorthWest LNG to make its final investment decision on the $11.4-billion Lelu Island terminal some time in the months after the May 9 B.C. election. Total project costs are slated to exceed $36-billion when including drilling, pipelines and other LNG-related parts of the venture.

Last June, Canpotex Ltd. scrapped its plans to build a Ridley Island potash export terminal, and that territory formerly designated for Canpotex represents another LNG development possibility on the southern end of the island.

"That conversation needs to take place between Shell and Petronas," Mr. Coleman said.

B.C. Aboriginal Relations Minister John Rustad said Pacific NorthWest LNG officials are examining options to slash construction costs. "The suspension bridge over the Flora Bank area is one very significant expense. They're looking at options that they can explore that would significantly reduce that expense," Mr. Rustad said in an interview.

Last month, the province signed new deals with the Lax Kw'alaams Band and Metlakatla First Nation, touting the potential for job creation from LNG while meeting environmental standards.

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"Pacific NorthWest LNG continues to review all aspects that have an effect on the overall competitiveness of the project, including economics, engineering, financing and potential design optimization for the project's marine terminal," said Spencer Sproule, Pacific NorthWest LNG's senior adviser of corporate affairs.

Industry experts say Pacific NorthWest LNG still likes the bridge-and-jetty design because it received approval last year from the Canadian Environmental Assessment Agency, but that infrastructure would cost at least $1-billion to construct. Environmentalists, some aboriginal leaders and a group of scientists oppose the project.

Shaky economics, court challenges and infighting among hereditary chiefs have complicated matters for the LNG consortium.

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About the Author

Brent Jang is a business reporter in The Globe and Mail’s Vancouver bureau. He joined the Globe in 1995. His former positions include transportation reporter in Toronto, energy correspondent in Calgary and Western columnist for Report on Business. He holds a Bachelor of Commerce degree from the University of Alberta, where he served as Editor-in-Chief of The Gateway student newspaper. Mr. More


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