Lexpert Magazine

72 LEXPERT MAGAZINE | NOVEMBER/DECEMBER 2017 | LNG DEVELOPMENT | doesn't have a single major LNG export facility — and none under construction. Only one small project, the $1.6-billion Woodfibre LNG plant near Squamish, BC, appears even close to a final investment decision to proceed. What's happening in- stead is that Canada's natural gas is being diverted to US export facilities on the Gulf Coast, sold at a discount to make up for the distance it has to travel. So why are Canadian producers out in the cold? Many of the lawyers interviewed for this article attribute, to a greater or lesser degree, a regulatory process plagued by uncertainty and delay, but that's only part of the reason for the failure. Every- one points to economic forces as the single strongest factor. A global surplus sent natu- ral gas prices into a nosedive in 2014. "Most of these LNG projects were con- ceived of at a time the LNG price was about US$15 or US$16," says Alicia Quesnel, a partner at Burnet, Duckworth & Palmer LLP in Calgary, with a practise area focus- ing on energy. "It's now [in September] down to US$5 or US$6, so there's been a significant drop." Energy analysts say Ca- nadian projects need gas prices over US$10 to be economically viable, so planned proj- ects have been underwater for some time. at has led some project developers to make difficult decisions. In March, Royal Dutch Shell PLC scrapped plans to devel- op the Prince Rupert LNG project in BC, although it is sitting tight on the planned $40-billion LNG Canada plant, which has all the needed approvals and is waiting for the market to turn around before making a final investment decision. e dominant feeling in the energy com- munity is that the window of opportunity Canada had has been shut, says Quesnel, and "what we need to do is prepare for the next window." Analysts forecast that will come be- tween 2021 and 2025, when demand and supply for LNG are expected to balance out, sending prices back up. But even aer all the permits and ap- provals are obtained, the construction phase can take from three to five years, so "if Canada wants to be prepared for the next wave, those decisions are going to have to be made between 2018 and 2020." In other words, if Canada hopes to be- come an LNG exporter of any size, some bold commitments may have to be ob- tained before they are warranted by a re- bound in price. In July, a project led by Malaysian state- owned Petroliam Nasional Berhad (Petro- nas) announced it was killing plans for its $11.4-billion Pacific NorthWest LNG megaproject near Prince Rupert. e post- er child for Canada's LNG hopes, Petronas would have a seen a new 900-kilometre pipeline built to connect gas fields in Al- berta and BC to a new coastal liquefaction and storage export facility. In New Brunswick, Madrid-based Rep- sol and Irving Oil initially proposed con- verting an old Canaport liquefined natural gas import facility into a facility that can handle exports. ey received an export licence from the National Energy Board (NEB) but have put the project on hold. In Québec, Stolt LNGaz has also received regulatory approval, but it too has decided not to move forward. MARTIN IGNASIAK > OSLER, HOSKIN & HARCOURT LLP PHOTO: SHUTTERSTOCK "I don't think it's the time to give up on the possibility that we will become a major exporter through LNG facilities of natural gas. But what it is time to do is have a serious discussion and put in place regulatory mechanisms that will allow for the timely development of these infrastructure projects … "

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