Woodfibre LNG has declared that it has given the final green light for its Squamish project to proceed.
After years of deferring the $1.6-billion project, Woodfibre said on April 14 that it had issued a Notice to Proceed to its construction contractor, McDermott International.
This would pave the way for major construction to start in 2023, with an anticipated completion date somewhere around 2027.
“We have different terminology from other projects. While we don’t call it a [Final Investment Decision], this is similar in that it marks the go-ahead for construction,” said spokesperson Rebecca Scott in an email to The Squamish Chief at the time of the announcement.
“Pre-construction starts this year, then major works in 2023. There will be a gradual ramp-up to peak construction in 2025.”
Pre-construction refers to the $25-million site cleaning and preparation process, which has been ongoing to this point.
Since the company doesn’t use the term, ‘Final Investment Decision’, Scott said in the email, this will be the closest that Woodfibre LNG will come to declaring something of that nature.
A Final Investment Decision, or FID, is an industry term that generally denotes when a company decides to officially move forward with a project.
“Our Notice to Proceed is a final green light for the Woodfibre LNG project to move into construction,” Scott said in a follow-up email on April 18.
Another reason Woodfibre doesn’t use the FID term is because of its governance structure, she said.
“As a privately-owned project, Woodfibre does not use the same terminology as public companies such as Shell and the LNG Canada project,” wrote Scott.
The project is owned by Woodfibre LNG Limited, a privately-held Canadian company based in Vancouver with a community office in Squamish. It is a subsidiary of Pacific Oil & Gas Limited, which is part of the Singapore-based Royal Golden Eagle, or RGE group of companies. RGE was founded by Sukanto Tanoto, who is also its chairman.
Generally, an FID is a signal that a public company’s board of directors — which generally has governing power over the corporation — has voted in favour of giving a project the green light. In Woodfibre’s case as a private company, that wouldn’t apply.
“A Notice to Proceed is a routine step for LNG construction projects and is an instruction to the contractor that they may begin work,” wrote Scott. “It is comparable with a public company’s FID in that both can mark the final go-ahead announcements. For example, the LNG Canada project announced both their FID and [Notice to Proceed] on the same day.”
Change in language?
However, Omar Mawji, the energy finance analyst for Canada for the Institute for Energy Economics and Financial Analysis, said the language around the latest development could allow the company to play things by ear if the project’s circumstances change.
“I guess public perception of the project [is] that if they don’t go through the project, well, it doesn’t matter, because they didn’t actually formally have an FID in place,” said Mawji. “But if the project continues on, then at that point, they can say, OK, the Notice to Proceed is basically turned into a final investment decision.”
Mawji noted that the company has previously used the FID term.
“So what changed in the last year?” he said. “My feeling is uncertainty has changed in the last year. And that uncertainty is forcing them to proceed with the project because of the market right now.”
He noted that LNG projects are long-term ventures that don’t yield returns until their lengthy construction periods are finished.
“Until that point, you’re really not making money,” said Mawji. “So I think that this is their way of saying, ‘Look, let’s at least get the project through. And then in 2023, when we start major construction, that’s when we’ll be able to make that decision.’”
Woodfibre has been a contentious topic for years, with environmentalists calling it a step backwards in the face of a mounting climate emergency. However, Woodfibre has cast its product as a cleaner fossil fuel, which will replace dirtier forms of energy in its target market of Asia.
A related project, FortisBC’s Eagle Mountain pipeline, is expected to be constructed in tandem in order to supply the Squamish facility with natural gas.
Local environmental activist group My Sea to Sky did not provide a comment on the matter before press deadline.
The District of Squamish told The Squamish Chief it had no comment on this latest development.
