Hawaii LNG: Canary in coalmine or unrelated blip?

Naysayers say deal is a blow to Woodfibre, company says not at all related

Added to continuing low global gas prices, news of the abandonment of a potential deal that would have seen a massive investment in liquefied natural gas to power electricity in Hawaii led to local LNG-opponents predicting the failure of Woodfibre LNG.  

On July 15, it was announced a potential deal between Fortis Hawaii Energy and Hawaiian Electric Companies, which would have seen natural gas supplied by an expanded Tilbury Island liquefied natural gas facility in Delta, would not go ahead. Asserting a preference for renewable energy to power the island state, Hawaii’s Public Utility Commission denied a takeover of the electric company that would have paved the way for the LNG investment.

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“Hawaii’s commitment to a fossil-free renewable energy future was unshaken – a commitment sorely lacking in B.C.’s government,” said Eoin Finn, of the anti-LNG group, My Sea to Sky. 

“The Hawaii ruling has implications worldwide and is another major blow for Woodfibre LNG’s prospects.” 

FortisBC announced in May it had inked the conditional 20-year agreement with Hawaiian Electric Company for 800,000 metric tonnes of LNG per year from Tilbury, starting in 2021.

Finn said Woodfibre LNG was listed in FortisBC’s submissions to the Public Utilities Commission as a potential alternate supplier to the Hawaiian Electric Company contract in case FortisBC’s expansion plans for the Tilbury facility were rejected or delayed. In response to a request from The Squamish Chief, Finn could not provide a link to the document. FortisBC, provincial government and Woodfibre LNG spokespeople denied Woodfibre was ever considered an alternative to the Delta plant.

“That doesn’t make any sense,” said Byng Giraud, Woodfibre LNG’s, vice president of corporate affairs. “Why would you ship it up to us, just to ship it down there?” 

After the July Hawaii announcement FortisBC put out a news release that suggested the Tilbury expansion was not dependent on a sole agreement. 

“Fortis’ Tilbury LNG facility… is in discussions with a number of other potential export customers. The facility is currently undergoing a $400-million expansion to serve the domestic transportation and remote communities markets, which is expected to be commissioned by early next year,” the FortisBC release said. 

The Tilbury project and Woodfibre LNG are two totally separate projects, Giraud added. 

“Their success and our success are different things, and there are still LNG facilities being built and planned both in Canada and elsewhere,” he said. 

“The Tilbury project, they get gas from northeast B.C. or wherever and they get it on the pipeline, but besides that, they are two separate projects. Ours is to export our 2.2 million tonnes to Asia; theirs was to export 800,000 to smaller markets.” 

Giraud also pointed out the Hawaii deal fell through due to a merger that didn’t go ahead, “almost an entirely unrelated circumstance to the business decisions of any other LNG company you’ve heard recently.” 

However, Dermod Travis, executive director of IntegrityBC, which bills itself as a political watchdog organization, referenced the dead deal as “another setback” in the plans for a burgeoning LNG industry.

“I am still quite baffled at how they intend to make a buck quite frankly with the price of LNG today.” 

Travis sites the International Energy Agency’s 2014 World Energy Outlook that reported Canada’s LNG costs may come in at the highest in the world with a cost to export at between $13-14 per million British thermal units (MBtu). 

The spot price for liquefied natural gas is variable, he argues, but has remained below $5 MBtu since 2015. 

“When you look at what our costs are and what the spot price is, it is going to have to be a real big rebound before any potential LNG plant is going to be profitable,” Travis said. 

“Woodfibre thinks that somehow because they are going to be small that that means they will be an exception to all the other economic rules of the industry,” he said, adding that in his view, smaller producers are higher-cost producers.

Giraud has previously acknowledged the market is tough but reiterated it is not an impossible situation.

“We are still very much committed and we believe this is a market we can still thrive in, there’s still opportunities. When markets are up and markets are down there are always opportunities. We are still confident we can move forward,” he said. 

A representative for the provincial Ministry of Natural Gas Development told The Squamish Chief the partnership announced in May, with the Guangzhou Gas Group for one million tonnes of LNG for the next 25 years, is evidence of the Woodfibre LNG facility’s potential success. “The agreement will provide a long-term stable supply of B.C.’s natural gas to meet rapidly growing clean-energy needs in Guangzhou, China,” read an email from the ministry, which also stressed the Woodfibre LNG and Tilbury projects were not interconnected.

Giraud said Woodfibre LNG has been looking for efficiencies to save money, but noted that doesn’t mean safety has been compromised, referencing an accusation previously made by Finn and My Sea to Sky. 

“If I choose to buy a Honda instead of a Ferrari, I am not necessarily compromising safety. I just won’t drive as fast,” he said. “It is a rather silly cause-and-effect they have drawn.” 

Giraud also said Canada’s natural gas production has been going down year over year as the U.S.’s production has gone up.

“Gas consumption is not decreasing, it is increasing. What is happening is our share of that is decreasing. The climate isn’t being saved. What is happening is Canadians are being deprived of their markets, so we better find other markets. That is a wise thing to do for Canadians, for our natural resources.”

On its web page the provincial Ministry of Natural Gas Development states, 

“Global trade in liquefied natural gas (LNG) doubled between 2000 and 2010 and is expected to increase by another 50 per cent by 2020.”

Ministry representatives have continued to stand by the optimistic projection.

“Global demand for energy is increasing – an indisputable fact all analysts have documented. There are various opinions on the scale of natural gas demand on the global market,” read the emailed statement from the ministry, drawing attention to the 2015 World Energy Outlook report that “concluded broad-based growth in global natural gas demand, up 47 per cent by 2040, is expected to be led by China and the Middle East.”

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