April 7, 2020
It didn't take long for the novel corona virus to spread from humans to BC’s liquefied natural gas (LNG) projects.
ON APRIL 2, LNG Canada chief executive officer Peter Zebedee announced that in response to the COVID-19 pandemic, the foreign consortium had cut its 1,800-strong Kitimat workforce by 65 percent, continuing with only “essential” work. (Wonder what those 1,200 non-essential workers were doing.)
LNG Canada CEO Peter Zebedee says 65 percent of workers have been sent home
Despite this, LNG Canada is persisting with its GHG-laden future. Zebedee said in his letter that “we have every intention to deliver.” Zebedee is a former vice-president of Shell, which, as the largest partner, owns 40 percent of the project.
However, I can’t help but ask whether Zebedee has spoken recently to his own head office.
For on March 23, the multinational fossil fuel giant announced it is slashing spending world-wide. Without revealing details, Shell said it is cutting annual operating costs by $3 - $4 billion US, and capital spending by $5 billion US this year. A week later, on March 30 Shell said it is pulling out of the Lake Charles LNG project, a partnership with Texas-based Energy Transfer to convert the existing Louisiana LNG import facility to one that would export 16.45 million tonnes per annum (MPTA) of LNG. This compares with LNG Canada’s 14 MPTA for its first phase.
Why did Shell withdraw? To “preserve cash and reinforce the resilience of our business,” said Shell’s Maarten Wetselaar, adding that “the time is not right for Shell to invest.”
Where have we heard that sort of language before? Last fall, Kitimat LNG partner Woodside Energy said it wanted to reduce its 50 percent share of the project, joined in December by the other partner, Chevron, which wants to exit completely. Both companies said the reasons were risk and cost. The virus is also affecting other Woodside projects. In March, Woodside cut its spending in half, and delayed decisions on three planned LNG projects in its native Australia. It blamed COVID-19,as well as the oversupply of crude oil and LNG.
A much smaller BC LNG project has also been infected by the virus. Woodfibre LNG, which planned to produce 2.1 MPTA on the shores of Howe Sound, said in March it was delaying its start date from summer 2020 to the end of 2021, in part because of the virus. Like LNG Canada, Woodfibre LNG—owned by Asia-based Pacific Oil & Gas—is building much of its plant in Chinese fabrication yards.
Woodfibre LNG delays Howe Sound project in part due to COVID-19
Texas-based Fluor is building the LNG Canada facility in partnership with Japan’s JGC. Asked about the project during a February 18 analyst conference call, Fluor chief Carlos Hernandez said “at this point, we don’t see any delays, but obviously we’ll wait and see when we wrap up completely.”
Marc Lee, senior economist with the Canadian Centre for Policy Alternatives, said in an interview the fact that much of the LNG Canada plant’s construction work is being done at the Chinese fabrication yard may be a hiccup for the project: “The supply chain may be severely disrupted.”
Economist Marc Lee: LNG Canada’s Chinese-built modules may be delayed due to supply-chain disruption.
At a time of severe financial stress on BC’s economy, the growing possibility that LNG Canada may not proceed cannot be good news for Premier John Horgan, who has claimed that the $40 billion project would bring the government $23 billion in new revenue.
Then there is LNG Canada’s contribution to increasing GHG emissions, at a time when the entire planet is supposed to be drastically cutting them. According to BC government data, the first phase of the project will add 3.45 MPTA of GHG emissions, though the figures have been widely criticized as considerably under-estimating fugitive emissions (those released before the fracked gas arrives at the facility.) If fully built, LNG Canada would result in 6.9 MTPA in emissions—more than one-third of the 18.9 MTPA in GHG reductions under specific programs of BC’s CleanBC plan.
Green MP Elizabeth May is confident that neither LNG Canada nor Woodfibre LNG will go ahead. “The whole notion that they’re going to proceed with any of these is fanciful,” May said in an interview. “The economics of these projects are absolutely not on.”
The Green Party has proposed a detailed plan to reassign fossil fuel workers to cleaning up orphan wells, while transforming to renewable energy.
Neither Shell nor LNG Canada had responded to Focus requests for comment by the time of publication.
Russ Francis is not sad about some effects of COVID-19: the suspension of Hockey Fight in Canada, the estimated 5 percent drop in 2020 GHG emissions, and the expected cancellation of the Calgary Stampede.