Business in Vancouver
July 8-14, 2008;

While worldwide demand for cleaner energy options grows, companies’ multimillion-dollar terminal plans mired in delay

Krisendra Bisetty

The race to build two liquefied natural gas (LNG) terminals in B.C. has slowed to a crawl, with a major proponent again delaying plans for a $700 million plant as it struggles to find a supply source.

Kitimat LNG Inc. president Rosemary Boulton told Business in Vancouver that the company’s fully permitted project, which has already been delayed twice, will now likely get off the ground in the fall of 2009 – a year later than last scheduled.

She added that Kitimat has still yet to secure supply for the plant.

In the meantime, the Calgary-based company is “developing a relationship” with a potential customer for the LNG from its proposed terminal in Kitimat.

“The negotiations are confidential, but we remain optimistic that we’ll be able to move forward with the project.”

While there’s “nothing definitive” yet in respect of its $700 million LNG import terminal on Texada Island, Surrey-based WestPac LNG Corp. is confident it’s on the right track with its other plan – a $1.3 billion, 600-megawatt natural gas-fired power generation facility on the same site.

BC Hydro’s recently released long-term acquisition plan, which details how the utility will secure its power supply over the next 10 years, has identified among other things the refurbishment of its 950-megawatt Burrard natural gas-fired power generation plant as part of a $3.4 billion asset renewal and maintenance program.

“That reaffirms in our mind that BC Hydro still sees a role for some gas-fired power generation down here in the Lower Mainland, which of course is one of the attributes of our project,” said WestPac president Stu Leson.

“Burrard is about 50 years old now.

“It uses very old technology. It’s a highly inefficient plant. The only thing it’s got going for it is it’s in the right location.”

Leson said CO2 emissions from WestPac’s proposed facility would be roughly 50% lower than Burrard’s: “We think it’s a critical part of a green plan.”

Leson added that Hydro needs a backup power supply because other renewable power sources are not available 24 hours a day and throughout the year.

“It’s got to be the kind that you can turn off or turn on depending on whether the wind is blowing or the rivers are running.”

On the LNG side, WestPac now expects its project, which has yet to enter the permitting process, to be operating by 2014 if it can find a supply source.

A growing consumer interest in alternative fuels, including for LNG-powered vehicles, is giving the company some reason for optimism.

It has also prompted discussions with Vancouver fuel system developer Westport Innovations Inc. on ways to expand the LNG vehicle market.

Westport, which has a long-time partnership with engine manufacturer Cummins Inc., has enjoyed strong global revenue recently as growth for its medium duty engines for city buses and commercial vehicles such as refuse trucks and shuttles.

The company has also launched commercial production of LNG engine and fuel systems for heavy duty truck applications.

“The only thing that is stopping them in British Columbia is LNG supply,” said Leson. “It’s very expensive to manufacture liquid natural gas from natural gas domestically.”

WestPac believes between 15% and 20% of its LNG could go into the domestic vehicle market. That would lower both emissions and costs when compared with diesel alternatives. The rest would ideally be re-gasified and piped to Terasen Gas Inc., B.C.’s natural gas provider.

Leson said construction of several LNG plants elsewhere in the world, including in Quebec, Russia and Indonesia, wouldn’t have much of an impact on WestPac’s project, although he added that there was room for only one in B.C.

“I can’t see both [WestPac and Kitimat] projects going ahead,” he said. “If you look at demand in the Asia Pacific region, we don’t believe there’s enough supply for more than two terminals on the West Coast.”

In Baja, California, an LNG receipt terminal is scheduled to begin operating this year.

The two B.C. LNG proponents are also watching as global energy companies clamour to get a foothold in the province’s potentially huge natural gas discoveries. In northeastern B.C., the Montney gas play in the Fort St. John area and the Devonian shale gas play in the Horn River Basin contain at least double the known natural gas reserves for all of Western Canada.

“Those are good, but the question with that is the same question with the oilsands,” said Leson. “What is the energy input that is going to be required to get the energy out, and what are the costs of developing those reserves?” •

kbisetty@telus.net