AltaGas halts Douglas Channel project in latest blow to B.C.’s LNG ambitions

CALGARY – AltaGas Ltd. said Thursday it has stopped work on the Douglas Channel liquefied natural gas project in British Columbia, delivering the latest setback for the province’s LNG ambitions.

During a conference call to discuss its financial results, AltaGas CEO David Cornhill said the consortium behind the project failed to secure sales contracts for LNG exports.

“Without a meaningful offtake agreement, the consortium can no longer continue the development of the project,” said Cornhill.

The LNG industry has been hampered by low natural gas prices and an oversupplied market in recent months.

Still, Cornhill said AltaGas has made significant progress on developing the Douglas Channel project, including securing permits, adding that it could restart work in the future.

“We will continue to work with the Haisla (First Nation) and support them in every way possible to realize our joint dream of seeing LNG development on the Douglas Channel,” said Cornhill.

AltaGas, along with its global partners Idemitsu Kosan Co., EDF Trading Ltd. and Exmar NV, had been aiming for the project near Kitimat, B.C., to begin exporting LNG in 2018.

The project had recently been held up over a 25 per cent excise duty being charged on its floating LNG facility.

AltaGas said that had been resolved and no duty would be charged, but with the unfavourable markets they couldn’t proceed with the project.

The company also confirmed that the Triton LNG project it was also developing in B.C. with Idemitsu has been delayed. It was expecting to begin production in 2019.

“It’s certainly on the back burner,” said AltaGas president David Harris on the conference call. “We’ll just see how the markets develop here in the coming years and if they bounce back appropriately.”

In early February, Royal Dutch Shell said it was postponing an investment decision on its proposed LNG terminal in Kitimat until the end of the year.

LNG prices in Asia have taken a hit in recent months as they’re largely tied to crude oil prices, which have dropped by around 30 per cent since November 2015.

The Douglas Channel project is one of the smallest of the more than 20 proposed LNG projects in Canada with the potential to export about 2.4 billion cubic metres of natural gas per year, compared with 33 billion cubic metres for Shell’s LNG Canada project.