Shell PLC’s LNG Canada export project in British Columbia plans to begin construction of its proposed second phase using natural gas-fired turbines and switch to electricity as more renewable energy becomes available, a top executive said, a decision that means the Expansion project will initially achieve high yields greenhouse gas emissions.
LNG Canada, in which Japanese Mitsubishi Corp has a 15 percent stake, is set to become Canada’s first liquefied natural gas (LNG) export terminal. The first phase is expected to start around 2025.
As global demand for natural gas from sources other than Russia accelerated following its invasion of Ukraine last year, LNG Canada is considering building a second phase by 2030 to double annual capacity to 28 million tons.
LNG Canada now plans to build Phase 2 initially with natural gas-fired turbines and switch to electric motors once more power becomes available pending a final investment decision, CEO Jason Klein told Reuters on Friday.
LNG Canada has previously only described this approach as one of the options under consideration.
The LNG Canada facility will receive natural gas from near Dawson Creek, BC via the 670-kilometer Coastal GasLink pipeline. At Kitimat, LNG Canada’s facility will liquefy the gas and export it overseas. (CBC News)
The company’s move to phase out electricity from renewable sources means that the Phase 2 project would initially produce high emissions that would violate the British Columbia government’s and federal government’s ambitious emission reduction targets.
Running the turbines on BC’s hydropower to liquefy the gas for shipping would limit emissions, but will require hundreds of miles of new transmission lines to reach the province’s remote northwest coast.
“We cannot immediately and comprehensively electrify the plant and the pipeline. That’s not possible today because the transmission infrastructure just doesn’t exist,” Klein said, adding that LNG Canada is in discussion with both governments and utility BC Hydro about when lines can be in place.
“If the force were there today, it would be a pretty easy decision.”
Canada’s climate and energy goals
LNG Canada’s dilemma illustrates the practical challenges of a global push to electrify buildings and vehicles to curb climate-warming emissions. The move will require the world’s grid to generate significantly more electricity and build infrastructure to deliver it.
Klein said LNG Canada has not directly requested financial support from any government to build transmission lines and electrify Phase 2 and is still evaluating the economics of the project.
“I wouldn’t expect to attract capital for a project that isn’t competitive,” Klein said.
LNG Canada has full environmental permits for Phase 2 deployment of natural gas turbines from both governments, making it unclear what leverage governments have to enforce electrification.
Prime Minister Justin Trudeau at a LNG Canada press conference in Vancouver on October 2, 2018. (Darryl Dyck/Canadian Press)
However, government cooperation is crucial for the construction of transmission lines.
“It would be difficult to make an investment of this magnitude without some level of guidance and support from host governments,” Klein said.
Russia’s invasion of Ukraine has upended gas supplies to Europe, leading to a scramble for alternative supplies. Some of Canada’s allies, including Germany and Japan, have asked Prime Minister Justin Trudeau to play a key role in increasing LNG supplies.
Ottawa wants to develop a Canadian LNG industry to boost the economy, but has also committed to cutting emissions by at least 40 percent by 2030.
The terminal, which LNG Canada says would have the world’s lowest emissions intensity, will emit four million tons of greenhouse gases annually, with both phases fueled by natural gas. That equates to 0.6 percent of Canada’s total emissions in 2020.
Phase 2 electrification is expected to be more expensive than using natural gas. But buyers may pay more for LNG produced with lower emissions, Klein said, noting that some buyers are already buying carbon offsets for LNG cargoes.
He said he was satisfied the province of BC could generate enough power for the terminal – the problem being how quickly new transmission lines can be built and how that would affect Phase 2 costs.
BC ready to power new industry
Mora Scott, a spokeswoman for BC Hydro, said the utility expects to have more than enough power by the end of the decade and is planning scenarios such as rapid growth through mining and LNG development.
Future LNG projects must fit BC’s climate goals, the province’s Department of Energy said in a statement, while Federal Environment Secretary Steven Guilbeault said it’s up to BC to decide what to do with its electricity.
Two workers at LNG Canada near Kitimat, BC (LNG Canada)
LNG production accounts for just 15 percent of associated greenhouse gases, and the rest is released into the atmosphere as consumers burn the gas, suggesting governments’ emphasis on terminal electrification is misplaced, Bruce said Robertson, an analyst at the Institute for Energy Economics and Financial Analysis, an independent energy research group.
“This is a classic example of how perverted carbon accounting is,” he said. “The LNG industry in Canada conveniently excludes where most of the emissions occur.”
Environmental groups blow up decision
In a press release, BC Green Party leader Sonia Furstenau said both the ruling BC NDP and the BC Liberals, who were in power when LNG Canada was approved, should be held accountable for the environmental costs of the project.
“LNG Canada is a carbon bomb,” she said. “We are in a climate crisis. We cannot afford to expand fossil fuel infrastructure.”
BC Prime Minister David Eby says he is committed to electrifying the provincial economy. (Ben Nelms/CBC)
Peter McCartney, a climate activist with the advocacy group Wilderness Committee, said the decision to use natural gas “risks wiping out BC’s climate plan.”
Premier David Eby said Tuesday at the BC Natural Resources Forum in Prince George he was committed to using electricity to fuel the province’s growth for everything from “LNG, forestry, mining to the vehicles we drive, and the fuels we use to heat our homes.”
“We will continue to work with the advocate [of LNG Canada] to ensure we meet our emissions targets,” he said.