Kitimat LNG plant picks Chiyoda-led group for engineering

LNG Canada has chosen a consortium lead by Japan’s Chiyoda Corp. to do preliminary engineering for its $10-billion natural gas liquefaction terminal in Kitimat, B.C.

The project has yet to get the final go-ahead, but Chiyoda will work with Foster Wheeler, SAIPEM and WorleyParsons on front-end engineering and design.

LNG Canada  — held by Shell Canada Energy (50 per cent), PetroChina (20 per cent), Korea Gas Corp. (15 per cent) and Mitsubishi Corp. (15 per cent)  – said it chose the contractors over another group led by France’s Technip S.A. because of demonstrated experience in LNG development and in Canada.

The Chiyoda-led group, called CFSW LNG Constructors, will begin activities in Kitimat on June 1, 2014. They will be in charge of hiring local general contractors for any site work if the project goes ahead.

The LNG Canada plan for two LNG processing plants each with the capacity to produce six million tonnes annually is one of two LNG projects proposed for Kitimat and 13 proposed for B.C.

None of these projects has had a final go-ahead. LNG Canada CEO Andy Calitz said a decision could still be two years down the road.

“While this is a great step forward, a decision to build the facility is still some time away,” he said in a news release.

The project faces a community consultation process and then environmental assessments by the province and Ottawa before it will be cleared to build.

Grabbing world markets

The $400-billion Russia-China gas deal has implications for Canadian businesses hoping to export LNG to China, according to Gordon Houlden, director of the China Institute at University of Alberta.

"For any potential gas exporter, it`s a race to the market," he told CBC, pointing to the long timeline before any of B.C.`s potential LNG projects is built.

"It doesn`t mean there`s not opportunity for Canada," he added. China will want to diversify its sources of gas, though it is also developing its own projects and in a decade may have lots of choice.

And for the first two or three B.C. projects to come onstream, there will be potential to sell to South Korea, Taiwan and Japan, where gas prices are three times as high as they are in Canada, Houlden said.

"If Canada wants to continue to have export markets for its natural gas, it has to act," says Michael Burt, director of industrial economic trends of the Conference Board of Canada.

But the economics, including B.C.'s royalty regime, have yet to be worked out.

Working out the cost

"There are significant costs associated with liquefying a gas and transporting it across the ocean, so that would eat up some of the price differential between North American and Asian prices. The other issue is the buyers in Asia would like to pay North American prices, rather than Asian prices so the terms of the contracts need to be developed and that will help determine the pace of development," he said in an interview with CBC`s The Lang & O`Leary Exchange.

Australia and the U.S. are also racing to take advantage of the Asian market, he said.

The B.C. government is hosting an international LNG conference in Vancouver today, the second year it has held a conference geared at creating interest in the LNG industry.

The province sees LNG exports to Asia as a promising new market and a means of boosting economic growth.

Premier Christy Clark has repeatedly promised that B.C.'s prospective LNG industry will be the cleanest in the world.

But organizers of what's being called a "counter summit" at Simon Fraser University, say people from northwestern and northeastern BC, where all the LNG activity is taking place, are not seeing the guarantees they need.

"What a lot of the community folks are saying is that there are problems associated with this, and they do not feel their government is listening," said Leila Darwish of the Council of Canadians, organizer of the counter summit.