Pipeline Installation a Positive Sign for Canadian LNG Exports

(Bloomberg) —

TC Energy Corp. has welded the last stretch of the Coastal GasLink pipeline into place, adding to signs that a huge facility to export liquefied natural gas off Canada’s west coast is on track to start up on time, or even early.

All of the pipes along the 670-kilometer (416-mile) route through northern British Columbia have been connected — with the so-called “golden weld” occurring on Oct. 7 — as well as coated, lowered into trenches and hydro tested, Calgary-based TC Energy said Monday. The next stage, called mechanical completion, involves additional documentation and engineering analysis before natural gas is introduced. 

The development may add to growing excitement in the Canadian energy industry about the speed of construction at the LNG export project that the pipeline feeds. LNG Canada — backed by Shell Plc, Mitsubishi Corp. and PetroChina Co., among others — has been billed as the single largest private sector investment in Canadian history and a way for the country’s gas producers to ship their output to new markets where they can garner higher prices. 

“Based on everything that we’re hearing and seeing, LNG Canada may start taking some test gas volumes by the middle of next year,” RBN Energy managing director Martin King said in an interview before the Coastal GasLink announcement. That would be earlier than the “middle of the decade” timeline LNG Canada has publicly provided, he said.

“There’s a palpable sense in the gas business that we’re going to actually have a real, viable outlet for Canadian gas exports other than the United States,” he said.

The optimism on LNG Canada’s completion contrasts with the lengthy delays faced by other major energy projects, such as the Trans Mountain oil pipeline expansion. Canada doesn’t currently have a major coastal LNG export facility, forcing it to send all of its excess gas south to the US, where prices are a fraction of what producers would garner in Asia. LNG Canada’s first phase is expected to chill and export enough gas to supply 20 million households in Japan for a year.

The LNG Canada group has dropped a number of clues about its progress. One job posting seeks a candidate who will move from the project site in Kitimat, British Columbia, to Calgary “after the LNG facility has achieved steady state operations” at the end of next year to mid-2025.  

“Everything we’ve heard is that everything is going smoothly,” said Jamie Heard, head of capital markets at Tourmaline Oil Corp., one of Canada’s largest natural gas producers.

LNG Canada spokesperson Brian Hutchinson said that the project is 85% complete overall and that commissioning and startup activities will begin in 2024, though he said they will take a full year. He reiterated the consortium’s previous forecast of first cargoes shipping by the middle of the decade.

LNG Canada’s investors haven’t made a decision yet on a second phase of the project, which would add two more liquefaction units. 

Work on Coastal GasLink “made tremendous progress” through the summer, putting the project on track for mechanical completion prior to the end of the year, TC Energy spokesperson Suzanne Wilton said, adding that reclamation work will continue into 2024. 

The project is expected provide welcome relief for Canadian natural gas producers that have been so frustrated by a lack of LNG export infrastructure that they have launched a project of their own and also sent gas all the way to export facilities in Texas.

“It’ll be huge,” said Cameron Gingrich, managing partner at energy consulting firm Incorrys Inc. “There’s a lot of money that will go toward filling that pipeline and project.”

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