Energy board OK’s its first 40 year natural gas export licence for LNG Canada

VANCOUVER—Plans for a liquefied-natural-gas export facility on British Columbia’s northwest coast inched forward after backers received the first-ever 40-year export licence issued by the National Energy Board.

The regulatory board granted LNG Canada the licence Thursday, allowing the international joint venture led by Shell (TSX:SHC) to export up to 38-billion cubic metres of liquefied natural gas annually from a terminal to be located near Kitimat, B.C.

LNG Canada will be allowed to export up to 1,494-billion cubic metres of gas over the 40-year term, but the licence will expire Dec. 31, 2022 unless exports have begun.

The licence is a significant milestone for the project, said LNG Canada CEO Andy Calitz.

“An extended term provides regulatory security beyond 25 years and allows us to better anticipate the economics of the project over a longer-time horizon,” said Calitz in a statement.

Until the National Energy Board Act was amended in June 2015, the maximum term length of an export permit was 25 years.

The prime minister and his cabinet must still approve the licence.

B.C.’s Ministry of Natural Gas Development said in a statement the province supports 40-year export licenses.

“It improves long-term certainty for the industry and strengthens B.C.’s competitive positioning in the global market,” said the ministry.

Concerns were raised during the application process about the amount of natural gas available in the Western Canada Sedimentary Basin, from where the gas will be extracted.

LNG Canada hired Navigant Consulting to assess the situation, and the firm delivered a report saying there is enough supply for about 100 years, even if all of the other proposed long-term gas exports in Canada proceeded.

The board said in a letter published Thursday exports will be surplus to Canadian needs.

“The board is satisfied that the natural gas resource base in Canada, as well as North America overall, is large and can accommodate reasonably foreseeable Canadian demand, including the natural gas exports proposed in this application, and a plausible potential increase in demand,” the letter said.

The export licence comes just days after the B.C. Oil and Gas Commission approved an LNG Canada facility permit, which outlines design, construction and operation requirements.

The four-square-kilometre facility will include a marine terminal, a rail yard, storage tanks and a water treatment facility.

Between 4,500 and 7,500 workers would be hired to construct the plant.

LNG Canada, which includes Shell Canada Energy and affiliates of PetroChina, Korea Gas Corp. and Mitsubishi Corp., has not yet made a final investment decision about the project.

“If the LNG Canada project moves into construction, it will be one of the largest energy infrastructure projects ever built in Canada, and will make an important and lasting contribution to the local, provincial and national economy,” Calitz said.

The project is one of 20 LNG proposals in B.C. Four have received environmental approval from the province, while two have been granted permission to proceed by the Canadian Environmental Assessment Agency.

The B.C. Liberal government has staked its political future on the LNG industry, with promises of 100,000 new jobs and $100 billion in revenue over 30 years.