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Ewart: Little room for error on B.C. pipeline

By Stephen Ewart, Calgary Herald June 6, 2012 1:51 PM

With Royal Dutch Shell revealing TransCanada Corp. will build a $4-billion pipeline to a liquefied natural gas plant it plans for the B.C. coast, the first major project is now on the table since the federal government unveiled its two-year regulatory review process.

The 700-kilometre pipeline – with initial capacity to deliver 1.7 billion cubic feet of gas a day – would run from Dawson Creek in northeastern B.C. to what will be the largest of three LNG plants proposed for the coastal town of Kitimat.

As currently scheduled, the project would be operational in 2020.

That’s eight years after the widely anticipated announcement for the project with political and public support before the first LNG cargo would be shipped to Asia.

The timeline doesn’t appear to fit with the “fast track” for industrial projects envisioned by Prime Minister Stephen Harper, but speaks to just how much engineering and construction goes into infrastructure projects.

For TransCanada, which will design, build, own and operate the pipeline, there’s actually little margin for error under the timeline.

Shell chairman Peter Voser told a Calgary audience in May that with the competition from Australia, the U.S. and elsewhere, there’s a “narrow window” to develop West Coast Canadian LNG projects to compete in the lucrative Asian market.

“It needs to get done in this decade, certainly,” Voser said.

Coastal GasLink will run near Enbridge’s proposed Northern Gateway oil pipeline, which would also end at Kitimat. Few expect the same opposition to a gas pipeline as a line to connect Alberta’s oilsands to the coast. TransCanada faces similar back-lash with its delayed Keystone XL pipeline from the oilsands to Texas.

“We will listen to feedback,” TransCanada chief executive Russ Girling said in a statement announcing GasLink.

Federal Natural Resources Minister Joe Oliver has been among the people complaining about delays of more than a year to the Northern Gateway regulatory review and bemoaning the slow pace of LNG projects.

The delays prompted Ottawa to develop new rules on the length of environmental reviews.

Consultants Ernst & Young recently said Canada needed to spend $50 billion on infrastructure, including pipelines, over the next decade to support LNG development. Critics warn a fast-tracked review process could become a rubber stamp.

Regardless, there are several reasons why British Columbians support LNG over oilsands.

While the oilsands are in Alberta – and the bulk of the economic spinoffs remain within the province – northeastern B.C. has some of the world’s largest reserves of unconventional gas with shale deposits containing trillions of cubic feet of gas.

As provinces control natural resources in Canada, numerous B.C. politicians have supported LNG exports – even if they opposed West Coast oilsands exports.

There’s also less risk of sustained environmental damage from a rupture in a gas pipeline or a crash of an LNG ship moving through coastal waters as with bitumen.

Many environmental groups and First Nations in B.C. support LNG as a cleaner fuel than oil but caution there are still concerns from GHG emissions from shale gas development to increased tanker traffic offshore B.C.

At the World Gas Conference in Kuala Lumpur on Tuesday, Voser and ExxonMobil chief executive Rex Tillerson cited the potential for gas to overtake coal as the world’s second-most widely used energy source after oil by 2025. Tillerson forecast Asian gas demand would grow by more than 50 per cent over the next three decades.

“Natural gas is quickly becoming a key enabler of economic growth and environmental progress around the world,” Tillerson said. “We are living at a historic moment in the evolution of energy markets. How we respond will shape the quality of life for generations to come.”

New production due to hydraulic fracturing has driven North American gas prices to uneconomic levels. With gas selling near $2 in North America and seven or eight times that in Asia there’s an obvious attraction for producers.

TransCanada’s line will serve the LNG facility planned by Shell and partners Korea Gas, Mitsubishi and PetroChina. Two other proposals have received LNG export licenses. Kitimat LNG is backed by Apache, Encana and EOG Resources, while BC LNG Ex-port Co-operative includes the Haisla First Nation, Houston-based LNG Partners and gas producers.

TransCanada could supply the other LNG plants.

“We expect that the Coastal GasLink pipeline will be expand-able, and, as such, could potentially deliver gas to other export terminals off the West Coast,” CIBC World Markets said in a research note.

GasLink will also connect with TransCanada’s existing pipeline network in Alberta and that would allow for fast growing B.C. production to more easily flow to the oilsands and beyond in Canada until the export terminals are operating.

Stephen Ewart is a Herald columnist.

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