Enbridge Inc. expanded its push into liquefied natural gas as global demand rises, snapping up a stake in a proposed West Coast liquefied natural gas project — even as the venture’s projected costs more than tripled.
On Friday, the Calgary-based energy company announced it is buying a 30% stake in the construction and operation of the Woodfibre LNG processing and export facility near Squamish, British Columbia
Pacific Energy retains a 70 percent stake in the $5.1 billion project under the partnership agreement with Enbridge.
Previous stakeholder estimates put the cost at $1.6 billion. The higher cost stems in part from funding for the expansion of FortisBC Energy Inc.’s Eagle Mountain pipeline, which would connect the proposed plant to the Enbridge grid.
“This facility will provide global LNG markets with a safe, secure and sustainable source of natural gas from British Columbia through a long-term transportation agreement on our T-South pipeline system,” a section of pipeline that connects British Columbia’s Lower Mainland to intensive production northeastern British Columbia,” Enbridge CEO Al Monaco said in a statement.
“Expanding global access to natural gas through LNG will play a critical role in North America’s energy future and help reduce the world’s greenhouse gas emissions by shifting power generation away from coal.”
The announcement comes as US natural gas prices hit $9 per mmBTU this week amid concerns about global energy security and Russia’s incursion into Ukraine.
In recent months, Monaco has been vocal about its belief in natural gas exports as a big opportunity for North America right now, and said Enbridge is seeing a surge in commercial interest from Asia and Europe to provide export capacity.
The project, which Woodfibre LNG said in 2017 would likely start two years later, said earlier this year it expected major construction to begin in 2023, issuing a notice to proceed in April to McDermott International. his main contractor.
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Planned for the site of the century-old Woodfibre pulp and paper mill – closed in 2006 – the plant is planned to pump 2.1 million tonnes of LNG per year, with a storage capacity of 250,000 cubic metres.
In 2017, the National Energy Board approved a 40-year export license for the facility. The project also received environmental green lights from the provincial and federal governments, as well as the Squamish First Nation, which gave the green light after a $1.1 billion benefits agreement.
However, the endeavor continues to meet some resistance.
Climate activist group My Sea to Sky said the economic viability of the project was “unstable” and depended on strong incentives and subsidies from the government.
“This is a risky investment by Enbridge that has a high probability of becoming a stranded asset,” Tracy Saxby, the group’s chief executive, said in a statement.
“Building LNG facilities is a multi-decade investment that will increase fracking in northern British Columbia and lock the province into fossil fuels for decades… There is no such thing as low-emissions LNG.”
Saxby also argued that the facility would put Howe Sound and Vancouver residents at risk due to increased tanker and pipeline activity.
Ratnesh Bedi, president of Pacific Energy, which is owned by Singapore-based RGE, said Enbridge’s investment “further accelerates Canada’s ability to be a significant player in the global energy transition by producing the world’s lowest-carbon LNG.”
Woodfibre LNG will use electric motor drives powered by hydroelectric power, making the plant “one of the lowest-emitting LNG export facilities in the world,” Enbridge said.
On Friday, the company reported that profit attributable to common shareholders fell in the latest quarter despite higher revenue.
Enbridge earned $450 million, or 22 cents per share, in the second quarter, compared with $1.39 billion, or 69 cents per share, a year earlier.
Adjusted earnings were $1.35 billion, or 67 cents per share, compared with $1.36 billion, or 67 cents per share, in the same period in 2021.
Revenue in the three months ended June 30 was $13.22 billion, compared with $10.95 billion in the year-ago quarter, the company said.
Enbridge reaffirmed its 2022 financial guidance of earnings before interest, taxes, depreciation and amortization between $15.0 billion and $15.6 billion and distributable cash flow of $5.20 to $5.50 per share.
The strong operating performance is expected to be offset by challenging market conditions affecting energy services and higher financing costs due to rising interest rates.
This report by The Canadian Press was first published on July 29, 2022.
Companies in this story: (TSX:ENB, TSX:FTS)
Christopher Reynolds, The Canadian Press
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