Exxon Mobil Corp. seems very late to the party, announcing on Jan. 12 its plan to build a $25-billion liquefied natural gas terminal near Prince Rupert, B.C. By contrast, the Kitimat LNG project, now led by Chevron, has been in development for a decade. More recently, the Pacific Northwest LNG project has been considered the front-runner among some 18 proposed facilities to export Canadian natural gas to Asia. But in December lead proponent Petronas pushed back its final investment decision by as much as a year. Even Malaysia’s national energy company, apparently, is pausing to heed the market signals as crude oil prices plunge.
Most likely the first plant to start shipping, if not the first to break ground, will be one of the smaller projects such as Douglas Channel Energy or Woodfibre LNG, which can rely on existing gas pipelines. But among the megaprojects, the ones that really reshape the market for Canadian natural gas, Exxon’s may be the one to watch.
For years we’ve known Exxon had its eye on the Canadian LNG opportunity. In 2012 it bought Celtic Exploration Ltd. for $3.1 billion, vastly increasing its acreage in the shale gas formations of northern B.C. and Alberta. Once again, by announcing a megaproject when rivals are backing away, Exxon and its Canadian subsidiary, Imperial Oil, are demonstrating a genius (and the necessary financial wherewithal) for shutting out the noise and moving at their own speed.
You’ll recall the last time oil prices tanked, in the spring of 2009, the two companies stepped forward to break ground on their Kearl oilsands mine in Alberta. They saw the crash as an opportunity to hire workers, line up contractors and order materials when they were the most available and cheapest in years. They also knew the project would not be producing until 2013 and prices would have recovered by then. If anything they overshot their timing, experiencing another downturn in Kearl’s second year. But Exxon knew it was investing not for one year or two, but 40—time enough to expect several oil price crashes.
I remember in 2005 interviewing then-Imperial chairman and CEO Tim Hearn about Kearl, then in the planning stages, and the Mackenzie Valley natural gas pipeline, which despite since winning federal approval has been indefinitely shelved. At that time both projects faced daunting demands from governments, partners and First Nations quite apart from the physical engineering and business requirements. “Our business is about dealing with hard and difficult things,” he told me. “That’s what we do.”
Say what you will about Exxon’s long-time climate change denial, about the lingering damage from the Exxon Valdez disaster, about the fact it’s the archetype of Big Oil. The organization knows how to execute (since Valdez, it’s posted an industry-leading safety and accident-prevention record). Now it says, after considering eight sites, it wants to build a plant, known as West Coast Canada LNG, on Tuck Inlet. It isn’t bothering to line up a pipeline at this time, expecting another pipeline project to become available as the list of export plants gets winnowed down. And it expects to be up and running by 2024—by which time, several industry pundits have warned, the window for locking down lucrative supply contracts in Asia will have closed. Still, I wouldn’t bet against it.
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