World watches as Ottawa’s bullish shift on LNG puts wind at the back of two major projects

International investors are taking notice, insiders say, but the industry still has to overcome a 'painful' history of stalled developments and ballooning costsYou can save this article by registering for free here. Or sign-in if you have an account.Ottawa’s newly bullish tone on liquefied natural gas projects won’t spark a “revolution” in Canadian LNG development, but analysts and project executives say it has improved the outlook for two major proposals.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.Prime Minister Mark Carney’s push to make Canada a major LNG exporter is raising expectations that at least the two projects on the federal government’s major project’s list — Shell PLC-led LNG Canada Phase 2 and Ksi Lisims LNG — could move closer to final investment decisions.“The mood has changed considerably and I think that gives greater confidence that at least these two projects have a bit more wind at their back now,” Susannah Pierce, former Shell Canada president, said in an interview.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.“Given the fact that they are so advanced — LNG Canada Phase 2 because you’ve already done a lot of the pre-work and you already have an environmental permit for both phases — largely, yeah, I would say that they probably look pretty good.”Pierce added that she has seen anecdotal evidence that Ottawa’s rhetorical shift is registering with international LNG investors and companies.Still, the shift is unlikely to unleash a wave of new investment in Canadian LNG after years of stalled development and ballooning project costs, said Alex Munton, head of global gas analysis for Rapid Energy Group.“We’re not talking about a revolution happening in Canadian LNG; we’re really looking at the likelihood of two more big projects,” Munton said.“You just simply will not see the emergence of multiple new projects in Canada because the experience has been somewhat painful, and I don’t think that a new government, a new policy, can really alter that.”Canada is slowly working through a first wave of projects totalling just under 20 million tonnes per annum of LNG export capacity — primarily LNG Canada Phase 1 and two smaller projects currently under construction: Cedar LNG and Woodfibre LNG. By contrast, Munton pointed out, the U.S. Gulf Coast has over 200 million tonnes per annum either operating or under construction.“It’s literally a factor of 10 to one,” Munton said. “That says so much in terms of the ability to get projects done. It’s just harder in Canada.”Proponents say Canada’s significant advantages as an exporter — abundant, low-cost natural gas and proximity to growing Asian markets — are undercut by high costs associated with remote construction, complex permitting and regulatory requirements and labour logistics.For instance, Woodfibre LNG — backed by Enbridge Inc. and Pacific Energy (part of the Singapore-based Royal Golden Eagle group) — is under construction at a remote, water-access-only site on Howe Sound in southwestern B.C., and it has seen project costs rise to US$8.8 billion, up from US$5.1 billion.The project houses hundreds of workers on offshore “floatels” to avoid straining local infrastructure near Squamish — but securing approval for the first ship took three years, delaying workforce ramp-up.“Is it expensive to do business in Canada? Absolutely,” Woodfibre chief executive Luke Schauerte said. “These types of installations — moving workforces to remote locations and meeting their needs — it’s expensive.“But we have great Canadian trades. They do an exceptional job building this type of infrastructure, and making sure they have a quality (accommodation) to be productive is part of the package.”Schauerte said governments appear to be listening, noting that approval for the company’s second floatel — which arrived recently at the worksite near Squamish — took six months instead of three years.But he added that it remains to be seen whether Canada can become a major LNG player.“I think the proof will be in the pudding: how many of these investments happen and how many of them actually continue to grow?” Schauerte said. “But I do sense that everybody’s watching, and it’s a different message that’s coming across.”Munton said the companies behind the projects are still refining construction cost estimates — along with the LNG prices and contract terms required to make the projects profitable — even as some long-term capacity or off-take agreements have already been signed.One such deal announced earlier this week is expected to help de-risk the already sanctioned Cedar LNG project. Denver-headquartered producer Ovintiv Inc. signed a 12-year agreement securing half a million tonnes per year of liquefaction capacity at the Haisla Nation-led facility, backed by Pembina Pipeline Corp., and currently under construction in Kitimat.Regardless of the perceived political tailwinds, proponents will ultimately decide whether the projects can compete with other LNG developments and investments in the U.S Gulf Coast and elsewhere.A final investment decision on the Nisga’a Nation-led Ksi Lisims LNG near Prince Rupert, backed by Houston-based Western LNG LLC and a consortium of gas producers known as Rockies LNG Partners — is expected early next year.LNG Canada Phase 2 is backed by the same joint-venture partners as the original project, including Shell, Malaysia’s Petroliam Nasional Berhad (PETRONAS), PetroChina, Mitsubishi Corp. and Korea Gas Corp. (KOGAS).A final investment decision is expected sometime in 2026 or 2027.“It’s like herding cats getting these things to investment-grade,” LNG Canada chief executive Chris Cooper said on recent episode of the ARC Energy Ideas podcast.“But to actually be put on that major projects list is a really, really important international signal … that Canada is open for business, and that they really support a Phase 2 FID — that can’t be understated.”• Email: mpotkins@postmedia.comPostmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.