LNG plans for Kitimat turns BC doom town to boom town: mayor
B.C. energy minister Rich Coleman said province negotiating at least three LNG development in Kitimat
Oil & Gas
foreign direct investment
liquefied natural gas
VICTORIA—The sense of excitement in Kitimat is palpable, says Mayor Joanne Monaghan.
The northwest British Columbia town cited by Census Canada in March 2007 as the community with the greatest population decline in Canada now is looking at multi-billion-dollar investments in proposed liquefied natural gas projects, aluminum smelter upgrades and the Northern Gateway pipeline.
Once posting a rental vacancy rate of 44.5 per cent, Kitimat now is brimming with construction jobs, fighting traffic jams and worrying about rising rents, said Monaghan.
Monaghan, elected to Kitimat’s council for the past 38 years, says residents are pinching themselves and wondering if it’s all real.
This month’s opening of Kitimat’s first Tim Horton’s outlet confirmed for Monaghan that economic reality hasn’t fully set in among residents.
“When I announced we would have a Tim Horton’s and people would meet me on the street they wouldn’t talk about the LNG, they would say ‘We’re getting a Tim Horton’s’,” said Monaghan.
Now, Monaghan said her council is seriously considering operating a local ferry service to bring aboriginal workers to Kitimat from area coastal villages of Klemtu, Hartley Bay and Bella Bella to work on what will be thousands of construction jobs.
“I honestly felt (four years ago) I was the mayor of doom and now I feel like the mayor of boom,” she said.
After more than a year of hype from the provincial government about a jobs plan focused on LNG development, Monaghan’s community and others are beginning to feel the creeping effects of the flurry of investment in the resource.
Recently, B.C. Premier Christy Clark likened the province’s LNG development opportunities to that of the Alberta oil sands.
Her government’s jobs plan forecasts one LNG export plant in operation by 2015 and three in operation by 2020.
The LNG projects involve building pipelines from northeast B.C.’s natural gas fields to LNG terminals near Kitimat, from where the product will be shipped to Asian markets.
LNG is natural gas that is cooled to the point where it can be loaded onto tankers.
Rich Coleman, B.C. minister for energy, mines and natural gas, said the province is in negotiations with at least three LNG development proposals in the Kitimat area.
Two others are proposed for the Prince Rupert area, about 120 kilometres northwest of Kitimat, and billionaire Krishnan Suthanthiran has proposed that Kitsault, a northwest mining ghost town he bought for $7-million in 2005, be used for an LNG export facility.
Two of the five proposed LNG projects highlighted by Coleman have already been granted federal export permits.
The Douglas Channel Energy Project is described as a small LNG plant, but will likely be the first in operation in the Kitimat area by 2015.
The project, already under construction, proposes to use the existing natural gas pipeline to Kitimat from the northeast to transfer the gas to a barge-based LNG plant in the Douglas Channel, where it will be loaded onto tankers.
Kitimat’s Haisla Nation aboriginals are business partners in this project.
The proposed Kitimat LNG project, which also has an export permit and is located on Haisla Nation land, is a joint venture of Apache Corp. and Chevron Ltd.
Late last year, Chevron purchased operating interest in Kitimat LNG and the Pacific Trail Pipeline from EOG Resources Canada Inc., and EnCana Corp., prompting industry analysts to state that LNG exports from Kitimat are getting closer to reality.
The third proposed LNG Canada project at Kitimat is being developed by Shell Canada Ltd., and joint venture partners Korea Gas Corporation (KOGAS), Mitsubishi Corporation and PetroChina Company Ltd.
Shell applied to the National Energy Board for a 25-year export licence last summer and announced plans to build a $4-billion natural gas pipeline from northeast B.C. to Kitimat.
Last September, British Gas Group Corp., announced a development deal with Spectra Energy to develop plans for a natural gas pipeline from northeast B.C. to a potential BG Gas LNG export terminal near Prince Rupert.
Earlier this month, Calgary-based TransCanada Corp. announced it was selected to build a $5-billion pipeline to connect the proposed Prince Rupert area LNG plant for Progress Energy, which is now a subsidiary of Malaysian state-owned firm Petronas.
Coleman said when companies like Shell, Chevron, British Gas and Petronas—whose profits last year was larger than B.C.’s total budget, show interest—the stakes become huge.
“These are not carpetbagger, shyster-type companies,” he said. “They are dead serious. That’s why we have to recognize we have to have our fundamentals in place and we have to be consistent about those fundamentals because the investment could go to another jurisdiction.”
Coleman cites staggering job creation numbers and financial returns if the five proposed LNG plants are developed.
The Energy Ministry forecasts one million person years of employment during the construction phases and 2,700 permanent jobs.
If five large LNG plants are built, the ministry forecasts the benefit to B.C.’s gross domestic product could reach more than $1-trillion by 2046.
At least $1-billion in royalty revenues could be achieved by 2020 from the first three LNG projects, says the ministry.
“I do know we think we’re going to have about a million jobs equivalent over a period of time, some temporary, some long-term,” Coleman said. “When I say it’s a game changer, it’s a game changer.”
Calgary-based energy expert Geoff Hill, a partner at Deloitte, said B.C. and Canada stand to create huge profits by seizing energy opportunities available in Asia with gas and oil, particularly China.
Hill said despite huge reported natural gas discoveries within China, the country’s projected growth and energy needs are mammoth opportunities for B.C. and Canada.
“The demand for natural gas globally is increasing daily,” said Hill. “That’s why there’s a lot of interest by a lot of the big players. When you have the likes of the companies that are involved and interested in this, it’s more of a reality than a dream.”
Natural gas export developments in Canada are attractive investment opportunities because of the huge available supply, stable government and stable economy, and the potential to sell the product at much higher prices in Asia, he said.
“You put all that together and globally, Canada is an attractive place to get natural gas from,” said Hill.
But potential labour shortages concern energy industry insiders and could play a role in future investment decisions, he said.
“It’s our opinion that Canada has a significant labour issue in the provinces that have the most growth, and that would be out West,” Hill said.
“Does that mean the projects will stop, no, but what it does mean is companies need to seriously look at those factors when they are planning out their capital investments.”
Skills training and labour shortages are destined to become major issues in this spring’s B.C. election campaign as both the government Liberals and opposition New Democrats have staked themselves as engines of provincial skills training.
Coleman said he expects thousands of skilled workers to descend upon northwest B.C. from across Canada to work on the LNG projects.
Hill said Canada’s labour needs require a three-pronged process that includes promoting skills training, relaxing immigration rules and offering inter-provincial transportation of workers.
Shell Canada spokesman David Williams said the company’s proposed Kitimat joint venture pipeline and LNG export project is targeting the Chinese market for the end of the decade.
“I think it’s too early to talk about identified customers, but if you look at the growth markets in the world for LNG, China would certainly be the country that’s likely to attract the most growth as it develops its economy,” he said.
“You have to consider natural gas and all its potential uses for generating electricity, for home heating and also as a transport fuel, and we believe that there is considerable growth in the Chinese market towards the end of the decade,” Williams said.
Recent numbers show Japan is currently the world’s largest importing of LNG at 79-million tonnes per year.
South Korea imports 36-million tonnes annually.
Qatar, Indonesia, Malaysia, Australia and Russia are among the world’s leading LNG export nations.
Back in Kitimat, mayor Monaghan says her husband recently exclaimed that he was forced to wait at three traffic lights before he made it home.
“Usually you go right on through,” she said.