Exxon plans to spend up to $25-billion to export B.C. LNG

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Exxon Mobil Corp. plans to spend up to $25-billion on a B.C. terminal to export liquefied natural gas, saying it has the global expertise to make the Canadian project viable.

The U.S. energy giant is positioning itself to make up ground on Malaysia's state-owned Petronas, which is widely viewed by industry experts as the front-runner among 18 entrants in the race to export LNG from the West Coast. But Petronas decided last month to delay its decision on whether to forge ahead with its Pacific NorthWest LNG joint venture near Prince Rupert, citing the need to decrease anticipated construction costs, overcome environmental hurdles and consult further with First Nations.

Irving, Tex.-based Exxon Mobil and its Canadian unit, Imperial Oil Ltd., disclosed the strategy for the first phase of their West Coast Canada LNG project, or WCC LNG, in a 141-page report.

"Exxon Mobil Corp. has more than 40 years of LNG project development experience, with interests in liquefaction capacity of approximately 65 million tonnes per year in Qatar, Indonesia and Papua New Guinea," according to the report filed by WCC LNG to the B.C. Environmental Assessment Office.

WCC LNG hopes to secure a provincial environmental assessment certificate by the end of 2016. Engineering studies are slated to be completed in 2017. That would clear the way for WCC LNG to make a final investment decision in 2017 on constructing an export terminal at Tuck Inlet, near the community of Prince Rupert in northwestern British Columbia.

WCC LNG forecasts that there will be up to 6,000 construction workers at the peak. Construction is expected to take seven years for an operation with an initial capacity to ship 15 million tonnes a year of LNG to buyers in Asia.

The capital cost for the first phase could range from $15-billion to $25-billion, depending on factors such as whether a barge-based marine facility or an onshore terminal is built.

It would mark one of the largest investments in British Columbia's fledgling LNG industry.

While there are 18 proposals to export B.C. LNG, no project has rendered a final investment decision yet.

If all goes well, more than 250 plant workers will be hired for WCC LNG's opening in 2024. Another 150 people could be required on contract to run services such as cleaning and catering to support the operation.

Tuck Inlet is in a cooler climate than many foreign LNG plants, making it cheaper and more efficient to super cool natural gas into liquid form.

"British Columbia's advantages for participating in the global trade of LNG include low ambient temperatures on the north coast, proximity to international markets where natural gas is in high demand and extensive gas resources from the Western Canadian Sedimentary Basin to support the export industry," WCC LNG said in its study. "Asian and global LNG markets offer a new long-term opportunity for Canadian gas."

Billions of dollars more will need to be spent if WCC LNG wants to pursue a second B.C. phase that would double the capacity to 30 million tonnes a year.

Keeping costs under control has proven to be difficult globally for a variety of LNG players. Overseas, Exxon Mobil has a 25-per-cent stake in the Gorgon LNG venture under construction in Australia. That project is slated for completion in the second half of 2015, after experiencing huge cost overruns.

WCC LNG unveiled its general concept in Canada in mid-2013, when it applied for an LNG export licence. After the National Energy Board approved the licence application in late 2013, Exxon Mobil and Imperial Oil spent more than a year working out details and preparing the "project description" report for the B.C. environmental regulator.

Besides seeking environmental approval, WCC LNG must also win over First Nations. "Aboriginal and recreational fishing are known to occur in Tuck Inlet," according to the regulatory filing. Company officials have been consulting with First Nations such as the Lax Kw'alaams, Metlakatla, Kitselas, Kitsumkalum and Gitxaala.

The report says the WCC LNG project won't be building its own pipeline to tap into natural gas supplies in northeastern British Columbia, but will attain "industry-sharing synergies" with a pipeline company. The Exxon Mobil-led venture wants to co-operate with one of the two pipeline projects envisaged for major LNG terminals in the Prince Rupert region.

Spectra Energy Corp.'s $7.5-billion Westcoast Connector Gas Transmission project (two pipelines) is targeted initially at BG Group PLC's Prince Rupert LNG project, while TransCanada's Corp.'s $5-billion Prince Rupert Gas Transmission line would feed the Petronas-led Pacific NorthWest LNG terminal on Lelu Island.

The B.C. government says the province's nascent LNG industry will make progress in 2015, predicting that long-term LNG contracts will increasingly form their own market instead of being so closely linked with oil prices.