​2018 forecast BC: LNG could be nothing or the biggest story of the year

LNG Canada CEO Andy Calitz. Image: LNG Canada

The biggest story in 2018 for the resource and energy sectors in B.C. will likely be the $7.4 billion Trans Mountain pipeline twinning project, which could be eclipsed only by LNG – the latter being either a total non-story or the biggest resources story of the year, depending on whether LNG Canada pulls the trigger on a final investment decision.

It’s anyone’s guess whether LNG Canada will announce a final investment decision on its $40 billion project in Kitimat in 2018 or if construction will start on the smaller Woodfibre LNG plant in Squamish. Construction on the latter was supposed to have started by now, but the construction schedule has been delayed.

The Trans Mountain expansion project might have been underway by now, but its schedule has been pushed back nine months due to delays in permitting, with the City of Burnaby being the biggest obstacle.

In mid-December, the National Energy Board (NEB) ruled that Kinder Morgan Canada (TSX:KML) can bypass Burnaby’s bylaws and proceed with the expansion of its Westridge Marine Terminal.

Up to 4,500 workers are expected to be employed on the project (in B.C. and Alberta) at peak construction.

According to the STEM Spotlight Awards, which promote careers in science, technology, engineering and mathematics, the Trans Mountain twinning project will generate 450 skilled trades jobs each year during the construction period for each of five “spreads” of the project. Those jobs include 105 heavy equipment operators, 170 labourers and welder helpers, 44 welders and 50 contract managers (foremen) for each spread.

But First Nations and environmental activists have threatened civil disobedience against the pipeline project on a scale not seen in B.C. since the 1990s War in the Woods over clear-cutting in Clayoquot Sound.

“I think we’re going to find out in 2018 whether Canada’s a land with the rule of law or whether Canada is on a track to being a Venezuela – a country with no law, lots of resources and inability to produce the things that it uses every day by everybody,” said Stewart Muir, executive director for Resource Works.

The one uncertainty for resource-sector companies is BC NDP government policy. From fish farms to fracking, all are up for some form of review by the new government.

Oil and gas companies have been investing billions in the liquids-rich Montney formation in northeastern B.C., despite uncertainty over an LNG industry ever taking off. Whether that level of investment will continue in 2018 under the new BC NDP government is open to debate.

At the end of November, the Fraser Institute published an industry survey that found falling investor confidence in both B.C and Alberta.

“British Columbia’s score dropped significantly this year,” the survey stated, “and investors now view this province as Canada’s least attractive jurisdiction for investment.”

There is a perception that the NDP government is hostile toward oil and gas – a perception B.C. Energy, Mines and Petroleum Resources Minister Michelle Mungall has strived, both in the legislature and in public, to change.

In question period, Mungall has asserted her government’s support for the natural gas and LNG industries. She also appeared in November at a Greater Vancouver Board of Trade discussion with LNG Canada’s CEO, where she confirmed her government is giving serious consideration to the concerns LNG Canada has expressed over issues like tax competitiveness.

But the industry in B.C. is facing rising carbon taxes, and the NDP government plans to initiate a scientific review of hydraulic fracturing in B.C.

But Muir doesn’t think that will be a major obstacle.

“I don’t think there’s any reason to think the gas industry in B.C. has got a target on its back,” he said. “It’s got the right culture of continuous improvement to survive what it’s required to do.”

— Business in Vancouver

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