Full Circle on Risk & Uncertainty: The Kitimat LNG Project – Greg McLean

by Greg McLean

Recently, Chevron Canada announced that it has failed to find a buyer for its 50% stake in the Kitimat LNG project, which has been on the market since December 2019.  Further, it is ending its funding for the project, leaving Woodside Energy as the sole proponent to find additional partners for this promising project – which should be Canada’s second LNG facility on the Northwest B.C. Coast. This revelation is yet another blow to Canada’s energy industry.

The Kitimat LNG project promises the ideal trifecta of Canadian energy development: good jobs developing cleaner energy with Indigenous partnerships. So seeing the project struggle to find viable partners is very concerning.  The proponents, including Chevron since 2014, have invested billions of dollars and advanced this project to a stage where its appeal from every metric is clear: it has contracted purchasers, regulatory approval, unanimous indigenous participation, and contractual agreements with BC Hydro making it the lowest GHG intensity LNG in the world. 

The project is tied to 4,500 construction jobs and 250 ongoing support jobs; 85% of these construction jobs have gone to First Nations workers and businesses. It has established unique partnerships with First Nations and is strongly supported by Indigenous communities across the value chain. Indigenous peoples want this project to be successful and are benefitting immensely from it. 

But this is bigger than benefits to Canada: LNG from this project would set the global standard for the lowest emissions intensity of any large-scale LNG facility. Its input power would be derived from hydropower, and its outputs would displace higher GHG-emitting coal, consumption of which is still growing in Asian markets. The resultant global reduction in annual GHG emissions would be equal to roughly the entire emissions of British Columbia.

And yet, an unforeseen hurdle remains: a complete lack of transparency on the outcome of any project in Canada. This is part of a broader trend in Canadian LNG projects. At one time, there were 15 proposals for LNG facilities on B.C.’s Northwest Coast; only one has reached Final Investment Decision. Cost overruns and project delays have been the norm, and Canada has shown the world that it has become an unreliable jurisdiction in which to invest time, effort, and capital.

There’s a central thread to all of this: Liberal Government policies that undermine the energy sector and drive investments and jobs out of Canada. Despite our world-class natural gas resource and our strong position to provide greener energy sources to meet Asia’s growing energy demands, investors are avoiding Canada. When they look at Canada, they don’t see opportunity; they see a non-constructive regulatory regime with rules seemingly being made up as projects go along. They see cancellations, delays, ‘lawfare’, mischief and misinformation from unaccountable entities – all creating great uncertainty.  And they see a national government that says one thing on key issues – like Indigenous economic reconciliation and environmental advancements – and then goes out of its way to create obstacles to actually solve these issues.

The cost of projects like Kitimat LNG failing is huge: beyond the loss of jobs and capital, Canada and the world will suffer environmentally. Every year that we delay making LNG available for developing markets is another year that these growing markets remain reliant on GHG-intensive coal power; energy that is polluting our air and driving us further from our global climate goals.

We need to turn this around immediately through clear policy that makes Canada a destination for global energy investment once again.

Speeches about the importance of Indigenous reconciliation and environmental advancements might sound nice, but they don’t provide any benefit without action to back them up. We need a government that understands the centrality of the energy sector to Canada and that will stand up for responsible energy development. This government has to stop accepting failure as an acceptable outcome. If it can’t do that, we have to stop accepting the failures of this government.

We are already a decade behind in building a world-leading, environmentally-advanced LNG industry.  Russia, Qatar, Australia, and the United States are striving to serve the world’s appetite for cleaner energy, and the world is not going to wait around for us. There is no time to waste.

Greg McLean is the Member of Parliament for Calgary Centre, and the Conservative Shadow Minister for Natural Resources.

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