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Oil vs. LNG | 21 owned and operated by a consortium including Shell Canada, Mitsubishi Corporation, Korea Gas Corporation and PetroChina International Investment Company Ltd. The $4-billion facility, including a pipeline from shale deposits in north-eastern BC, would export LNG to energy-hungry Asian markets from Kitimat, BC. Construction could begin in 2015. Others include the $25-billion Pacific NorthWest LNG owned by Malaysia's PETRONAS, and Apache Canada's and Chevron Canada's $4.5-billion joint venture known as Kitimat LNG. Those projects, if they go through, will turn Canadian natural gas into an international commodity much like oil, says lawyer Fred Cass, Toronto-based cochair of Energy Team at Aird & Berlis LLP. Traditionally, because it was mainly shipped by pipelines, natural gas markets developed close to the sources of the gas. "Natural gas traditionally hasn't had quite the same international character because it tends to move through pipelines." To make Canadian natural gas an international commodity, Hudec hopes and expects the federal government's attitude toward foreign and SOE investment in LNG projects will be "sharply different" from its oil counterparts. "It's easier for me to pass the net benefits test [with LNG projects] because of the more crying need for capital and expertise and the risk sharing associated with LNG projects," he says. There are other reasons why the feds would treat LNG projects differently when it comes to SOEs than the oil sands, say energy lawyers. Canada was on the forefront of developing the technology to extract bitumen from the oil sands. But Hudec suggests foreign companies – more often than not state-owned enterprises – have much more experience building the complex liquefaction plants needed to chill natural gas to -162 degrees Celsius and convert it to LNG so it can be shipped on specially designed tankers to Asian markets. If Canada wants that technology to build plants and export to those markets, the government will need to be more accommodating to SOE investment in that sector. SOEs have another potential advantage when it comes to acquiring stakes in the natural gas plays needed to feed LNG plants, suggests Edmonton lawyer Barry Zalmanowitz, QC, a partner and co-chair of Dentons Canada LLP's National Competition Law Group. Oil sands properties can require massive investment to merely extract the resource. Meanwhile, on the drilling or fracking side, extracting natural gas for LNG projects is a much cheaper proposition. That means potential foreign investors, even "There is a huge perceptual difference between natural gas pipelines and oil pipelines. Who hears about resistance to the LNG projects? But Gateway and Kinder Morgan are rife in the news. Enbridge has been totally botched and may go nowhere." -Al Hudec, Farris, Vaughan, Wills & Murphy LLP Lexpert®Ranked Lawyers Kangles, Nick J. Norton Rose Fulbright Canada LLP (403) 355-3835 nick.kangles@ nortonrosefulbright.com Mr. Kangles focuses his corporate/ commercial practice on clients developing energy projects, including pipelines, processing facilities, LNG plants, oil sands projects, upgraders and power plants. He also counsels energy service companies. Keizer, Charles Torys LLP (416) 865-7512 ckeizer@torys.com Mr. Keizer's domestic and international infrastructure and energy practice focuses on administrative and corporate/commercial law in the energy sectors, and includes project development and regulatory matters for sector participants. Kennedy, Jennifer K. Norton Rose Fulbright Canada LLP (403) 267-8188 jennifer.kennedy@ nortonrosefulbright.com Ms. Kennedy's practice focuses on IPOs, M&A, public and private reorganizations, financings, exchange listings, governance and general corporate and securities law. Her clients include companies in the oil and gas, resource and energy sectors. Keough, Loyola G. Bennett Jones LLP (403) 298-3429 keoughl@ bennettjones.com King, Richard J. Osler, Hoskin & Harcourt LLP (416) 862-6626 rking@osler.com Mr. Keough is chair of the firm's regulatory department. He has particular experience in oil, gas, electricity, LNG, rates, facilities and environmental matters. His clients include utilities, buyers, producers, shippers and banks. Mr. King advises clients on commercial and regulatory matters related to power project development, power trading and utility regulation, as well as the duty to consult Aboriginal groups regarding large natural resource projects. Koval, Patricia A. Torys LLP (416) 865-7356 pkoval@torys.com Ms. Koval practises in corporate finance (including investment funds), securities, M&A and governance. She has 20 years' experience with REITS, including domestic and cross-border IPOs, financings, management internalizations and mergers.

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