CALGARY – British energy firm BG Group is hitting the pause button on its proposed liquefied natural gas project near Prince Rupert, B.C., as it takes stock of shifting market conditions.
“All we’re doing at this point in time is pausing on Prince Rupert. We’re not abandoning Prince Rupert,” interim executive chairman Andrew Gould told analysts Tuesday on a conference call to discuss BG’s third-quarter results.
“We will continue to work on the project, but not at the same rhythm that perhaps we were working in 2014.”
Estimated LNG volumes from the United States are looking to be higher than previously expected at 90 million tonnes a year, versus 60 million tonnes, Gould said.
“So, as a result of this, coupled with weakness in gas pricing generally, there is a risk that the market will be very well supplied post 2020,” he said. “We’re pausing on Prince Rupert to see how the market evolves, particularly in function of total supply that will come out of the U.S.”
Rich Coleman, British Columbia’s natural gas development minister, said BG Group has always indicated it would take its time doing its homework before proceeding with the proposed LNG development.
“The CEO says they still look at B.C. in a positive way,” Coleman said Wednesday. “I didn’t expect anything out of them until 2016, probably at the earliest. They are just being prudent and they are looking forward. At this stage I’m still pretty confident.”
Premier Christy Clark echoed those sentiments.
“This was expected,” Clark said. “They are continuing though to do their consultations. They love the site. Love the opportunity, but they are making these decisions on their own timeline. They were never one of the early movers.”
BG’s proposed project, if it goes ahead, would be developed in two phases, eventually reaching a production capacity of up to 21 million tonnes per year. On its website, it says it aims to make a final investment decision by “mid-decade.”
BG is a major player in global LNG, with liquefaction plants in Egypt and Trinidad and Tobago. A new LNG project is expected to start up soon in Australia and another is being developed in Louisiana.
BG’s proposal is one of 18 planned for Canada’s west coast that would chill natural gas into a liquid state, enabling it to be shipped across the Pacific by tanker. No company has made an official decision yet on whether to go ahead with building their multibillion-dollar projects.
Last week, the British Columbia government announced a tax regime for its nascent LNG industry. The net income tax rate will be 3.5 per cent — half of what was proposed earlier. The rate will rise to five per cent in 2037 once the industry is established.
Malaysia’s Petronas, which is spearheading another LNG project in the Prince Rupert area, said it’s weighing the announcement.
Its CEO, Shamsul Abbas, had warned previously that Petronas might have to delay its investment in the Pacific Northwest LNG project by at least a decade because the economics of its proposal were being squeezed. Factors it cited included provincial and federal taxes and the sluggish pace of the regulatory process.
Coleman said he is travelling next month to Malaysia to meet with Abbas.
— With files from Dirk Meissner in Victoria