Haisla vote to join Cedar LNG Project despite looming global surplus

Under the Cedar LNG deal, the Haisla Nation owns 50.1 per cent of the project and Calgary-based Pembina pipeline holds 49.9 per cent.

The Haisla Nation and Pembina Pipeline could make a final investment decision on the Cedar LNG project by the end of this month. Cedar LNG image.

This article was published by The Energy Mix on June 17, 2024.

By Energy Mix Staff

Members of the Haisla Nation have voted almost unanimously to join the Cedar liquefied natural gas (LNG) project in Kitimat, British Columbia, just a few weeks after analysts warned against counting on significant international demand for Canadian exports.

Of the 496 community members who participated in the ratification vote, 461, or 93.5 per cent, agreed with a plan for the band council to borrow up to C$1.4 billion from the First Nations Finance Authority to help underwrite the venture, the Globe and Mail reports. The Haisla Nation owns 50.1 per cent of the project and Calgary-based Pembina pipeline holds 49.9 per cent.

The two partners could make a final investment decision on the project by the end of this month, the Globe says. They estimate they’ll need US$3.4 billion in capital spending and $600 million to cover other costs in order to complete Cedar, a floating liquefaction vessel with annual export capacity of 3.3 million tonnes of LNG. It’s expected to start shipping product to Asia in late 2028.

Cedar would take a share of the gas shipped from the fracking fields in northeastern B.C. via the intensely controversial Coastal GasLink pipeline, which had run far over time and budget by the time it completed construction in October.

“It’s absolutely imperative that our Indigenous community of Haisla are majority owners,” said Haisla chief councillor Crystal Smith. “It’s important for all aspects when it comes to any type of governance structure and all of the decision-making ability so that it’s embedded as truly majority owned by an Indigenous community.”

But last March, the Cleveland-based Institute for Energy Economics and Financial Analysis warned that a wave of new LNG development around the world was on track to exceed customer demand and leave Canadian exporters on the sidelines. Even in the wake of U.S. President Joe Biden’s blockbuster decision to pause approvals for new LNG export terminals, “Canadian LNG projects face an unstable future with increasing market risk,” wrote IEEFA Energy Finance Analyst Mark Kalegha and LNG/Gas Specialist Christopher Doleman.

At the time, hot takes from fossil industry analysts were suggesting a big opportunity to fill the gap left by Biden’s announcement. “It’s not very often that you get a second chance on an opportunity,” Enbridge CEO Greg Ebel told Calgary Herald columnist Chris Varcoe.

But IEEFA saw no advantage to take, with the world’s LNG supplies already set to increase 13 per cent by 2026 and a global glut expected in the second half of this decade, just as Cedar LNG is expected to go online. That was consistent with the International Energy Agency projecting peak global demand for all three fossil fuels by the end of this decade, and Carbon Tracker cautioning in late January that “projections for oil and gas consumption present a bleak prospect for the sector, regardless of what the industry may suggest.”

By the time new Canadian LNG capacity could ramp up, IEEFA said demand in China would be driven down by the country’s phenomenal growth in renewable energy. Other markets in Asia are entering a structural decline, the analysts said, with imports down 8 per cent last year in Japan, 5 per cent in South Korea, and unsteady LNG prices and supplies prompting other developing economies in the region “to second-guess the role LNG can play in their future energy mix.”

“It makes little sense for Canadian industry to aggressively push more LNG into the ocean when new supply is not needed, demand prospects are dwindling, and buyers are unsure of their long-term needs,” IEEFA wrote.

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