TransCanada Wins Approval for LNG Plant's Pipeline

In an announcement Thursday, oil and gas infrastructure firm TransCanada said that it had secured all ten necessary permits from the provincial government for the construction of its Coastal GasLink pipeline, which would carry natural gas from the Dawson Creek area of northeastern British Columbia to Shell's proposed LNG Canada terminal in Kitimat.

“This is a significant regulatory milestone for our project, which is a key component of TransCanada's growth plan that includes more than $13 billion in proposed natural gas pipeline projects which support the emerging liquefied natural gas industry on the British Columbia Coast,” said Russ Girling, TransCanada's president and chief executive officer.

If built, the 48-inch, 400 mile pipeline would have a capacity of two to three billion cubic feet per day of natural gas. TransCanada says that the project would create of 2,000-2,500 jobs (during construction), and $20 million in annual tax revenues. 

However, the pipeline still awaits a final investment decision from Royal Dutch Shell for the LNG terminal. The oil and gas firm says that LNG Canada must compete on priority for funding with two other LNG projects in the United States and a chemical plant in Pennsylvania. Shell says that in the current environment, it will not be green-lighting all four at the same time. 

"It's highly unlikely that more than I would say two, maybe only one . . . will actually go ahead in that time frame," said CFO Simon Henry in an investor conference call Wednesday. He suggested that the chemical plant was the most likely to be approved first, but emphasized that no decisions had yet been made.

But the project will be ready to move forward if it is selected, LNG Canada said. On Thursday, in Vancouver, the firm announced that it is already beginning engineering and planning for a workforce accommodation center, which would house 4,500 people during the plant's construction. 

Shell's LNG Canada plant would be five nm to the northeast of Chevron's proposed Kitimat LNG, which has its own pipeline plan (a component of which would also be developed in partnership with TransCanada). While there are a total of 20 active LNG proposals for British Columbia, analysts are skeptical that any will get final approval to move forward before the end of the decade. The Pacific basin LNG market is flooded with product, and prices are much lower than they were in 2012-2013, when many projects were first proposed.