VANCOUVER (miningweekly.com) – The Canadian federal government has approved the C$11-billion Pacific NorthWest liquefied natural gas (LNG) project, a proposed LNG facility and marine terminal near Prince Rupert, on British Columbia's North Coast.

Majority owned by Malaysia-based Petronas, the project approval is the result of more than three years of regulatory review, and is subject to more than 190 legally binding conditions aimed at reducing the environmental impacts of the project. For example, the project proponent Pacific NorthWest LNG will be required to comply with mitigation measures that will reduce adverse effects on fish, fish habitat, marine mammals, wetlands, migratory birds and human health.

The decision caps direct greenhouse-gas emissions from the project at 4.3-million tonnes of carbon dioxide a year.

In a joint statement issued on Tuesday, Environment and Climate Change Minister Catherine McKenna, Natural Resources Minister Jim Carr, and Fisheries, Oceans and the Canadian Coast Guard Minister Dominic LeBlanc stated that the Pacific NorthWest LNG project is a major opportunity to grow the economy.

“The Pacific NorthWest LNG project will deliver thousands of good jobs and will help pay for schools and roads and social programmes that enrich people's lives. We are moving forward with natural resource development in a sustainable manner, because we have an obligation to leave the planet in better shape than we found it,” Carr stated.

The project represents one of Canada's largest resource development projects with a total capital investment of up to C$36-billion when accounting for upstream natural gas development. During construction, the project will create about 4 500 jobs and a further 630 direct and indirect jobs during the operation of the facility. As well as benefiting from job creation throughout the region, local First Nations communities will also benefit significantly through agreements reached with the proponent.

COMMUNITY SUPPORT
Importantly, the First Nations LNG Alliance supports the federal government's approval of the Pacific NorthWest LNG project emphasising the prominence given to meaningful First Nations consultation and engagement, which demonstrates a proactive approach by the federal government and represents an historic step that will set a precedent for future projects.

To date, 16 First Nations along the proposed Prince Rupert gas transmission project route, which will feed natural gas to Pacific NorthWest LNG, have signed benefit agreements with the province. Seven other First Nations are working with the province on agreements for facilities related to Pacific NorthWest LNG.

"The only way to get resources to market in the twenty-first century is if it can be done in a responsible and sustainable manner. This decision reflects this objective. With the legally binding conditions we are putting in place and with British Columbia's commitment to increase its price on carbon in line with the Pan Canadian Framework, I am confident that we will minimise the environmental impacts of the project and ensure that it proceeds in the most sustainable manner possible,” McKenna commented.

The Pacific NorthWest LNG facility would be located on Lelu Island. The proposed project would convert natural gas to LNG for export to Pacific Rim markets in Asia. At full build-out capacity, the facility will receive about three-billion cubic feet a day of pipeline-grade natural gas and produce up to 18-million tonnes a year of LNG.

LNG is natural gas that is cooled to about -162 ˚C, where it becomes a liquid and can be stored at atmospheric pressure. Once delivered to markets by specially designed LNG carriers, the LNG will be returned to a gaseous state and sent through pipelines for residential, commercial and industrial use.

INVESTMENT DECISION
With all conditions in place for Petronas to make a final investment decision, it will take a hard look at current LNG prices, which have tumbled about 70% from around $20 per million British thermal units (mBtu) in 2011, when the project was first conceived, to about $6/mBtu.

FirstEnergy Capital analyst Ian Gillies sees Petronas needing to undertake a new cost review of the project to see if financial hurdles are met. He says this may take up to six months to complete and reckons that a final investment decision by Petronas and partners is “far from certain”.

FirstEnergy analyst Martin King also advised that there remain many moving parts to this story, the least of which is whether the environmental conditions “may be so costly as to prevent the project from proceeding to a final investment decision".

Meanwhile, the project is being opposed by several camps, including nongovernmental organisation Clean Energy Canada, which believes approving the project is inconsistent with the federal government’s commitments to lead on climate change and clean innovation.

"The conditions that come with this approval set the bar too low. Ottawa should have required Pacific NorthWest to run on clean electricity and use available technology to reduce its carbon pollution by more than 40%. If this project is built as currently approved, it will be one of the single biggest sources of carbon pollution in the country," director Merran Smith stated.

“Despite this approval, there is no guarantee that Pacific NorthWest will be built. As the cost of renewable energy continues to fall, it is increasingly uncertain that LNG exports can compete in Asian markets.”