A planned LNG export project in Western Canada faces delays and cost risks due to infrastructure gaps and weak global demand, a report said on 11 June.
The Ksi Lisims LNG project, located in British Columbia, has yet to secure a pipeline to transport feed gas to the terminal site, according to the Institute for Energy Economics and Financial Analysis (IEEFA).
The project partners have purchased the Prince Rupert Gas Transmission (PRGT) pipeline project – a proposed 900 km gas pipeline first approved in 2014 to serve the Pacific Northwest LNG project but abandoned due to unfavourable market conditions and indigenous opposition.
The partners intend to adapt and reroute the pipeline to serve as the project’s main feed gas line. However, this is fraught with costly logistical and regulatory challenges.
The project also depends on electrification to meet provincial emissions standards. Analysts say it is unclear whether electric utility firm BC Hydro can supply the required electricity within construction timelines.
Developers have not disclosed any firm purchase agreements, raising further questions about the project’s commercial viability.
Global LNG markets are expected to be oversupplied from 2025 through 2027, with new production from Qatar and the US weighing on prices, IEEFA said.
Between 2025 and 2030, a total of nearly 290 billion cubic metres per year of new LNG export capacity is expected to come online from projects that have already reached final investment decision and/or are under construction.
Rising costs for materials, permitting delays and inflationary trade policies could push the project over budget, the report added.
Similar issues were responsible for the Coastal GasLink Pipeline – built to transport natural gas to LNG Canada and other projects – exceeding its budget from an initial estimate of $4.5bn to a final tally of $14.5bn.
Projected costs for the PRGT pipeline have already doubled from an initial estimate of $5bn to between $10 and $12bn today.
“Stakeholders in an LNG project collectively bear the project’s risks but often face disproportionate and sometimes divergent financial, environmental and social outcomes,” said Mark Kalegha, author of the report.
Western Canada has long promoted its proximity to Asian markets as a key advantage, but analysts warn that geographic benefits alone may not offset weak demand growth.
Ksi Lisims was announced in July 2021 as a joint venture between the indigenous Nisga’a Nation, Rockies LNG Partners, Western LNG, and other partners.
The project consists of two floating liquefaction, storage and offloading barges that will receive a total of about 695 billion cubic feet per year of natural gas, to produce up to 12 million tonnes of LNG per year.
