October 24, 2017 / 8:55 PM / a month ago

Small Canadian LNG project delayed to 2018 as costs bite

VANCOUVER, Oct 24 (Reuters) - A construction decision on a small-scale liquefied natural (LNG) gas export terminal on British Columbia’s coast has been pushed back to 2018, as Woodfibre LNG Ltd works to make its C$1.6 billion ($1.3 billion) project competitive in the face of weak prices.

The Vancouver-based company, which is backed by Indonesian billionaire Sukanto Tanoto’s RGE Group, said previously it would start construction on the 2.1 million tonnes per annum (Mtpa) terminal this year.

“We’re definitely moving forward, but the reality is that we still have some issues to resolve before we can say: ‘We’re in and this is actually happening on this timeline,'” said spokeswoman Jennifer Siddon.

Woodfibre LNG is a relatively small project, but has long been touted as the best hope for seaborne exports of Canadian natural gas. While dozens of projects have been proposed for British Columbia’s coast, none have moved to construction.

Siddon added that a dual front-end engineering process by KBR Inc and JGC Corp was complete, and that the company would be moving to the next stage of engineering, procurement and construction (EPC) with Houston-based KBR.

“The process between the completion of FEED and EPC can take several months, so that would take us into 2018,” Siddon said. A construction decision would come once an EPC deal is in place, with the build taking two to three years.

Malaysia’s Petronas earlier this year scrapped its $29 billion export terminal in a major blow to Canada’s LNG ambitions. China’s CNOOC Ltd has also backed away from a planned terminal.

Woodfibre is seeking help from both provincial and federal governments to give it a competitive advantage.

Siddon pointed to tax breaks on electricity costs, as the project would be hydro powered, and the relaxing of import tariffs on fabricated steel components as measures government could take to help the project move ahead.

“It’s a challenge right now,” she said. “And much of why the projects aren’t getting built here - or not as quickly as other jurisdictions - comes down to competitiveness,” she said.

The project is competing with a swath of LNG terminals operating and under construction on the East Coast of the United States. This as global LNG prices have slumped as new terminals have come into operation worldwide.

Woodfibre LNG has an offtake deal with Guangzhou Gas Group covering nearly half its planned exports. ($1 = 1.2674 Canadian dollars) (Reporting by Julie Gordon, editing by G Crosse)

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