Woodfibre Ready to Clinch Canada LNG Project on Guangzhou Deal

  • Negotiating sale of 1m metric tons per year to Guangzhou Gas
  • Final investment decision possible by end of the year

Woodfibre LNG Ltd. may move ahead with a project by the end of the year that could make it one of Canada’s first exporters of liquefied natural gas.

Woodfibre, backed by Indonesian billionaire Sukanto Tanoto’s RGE Group, is in talks to sell Guangzhou Gas Group Co. 1 million metric tons per year of LNG for 25 years, starting in 2020. As part of a preliminary agreement signed Monday, Guangzhou Gas is also considering acquiring a 10 percent stake in the project on Canada’s West Coast.

"That portion of gas may be sufficient to make a final investment decision," Byng Giraud, Canada country manager for Woodfibre, said in a phone interview Monday from Vancouver. "We’re very confident of moving forward with the project."

A glut of seaborne natural gas and plunging prices has caused cancellations and delays of LNG projects from Australia to Qatar. Investors have yet to sanction a single LNG export project in Canada, where projects face longer transit routes and higher extraction costs than some competitors.

Woodfibre could make a final investment decision "toward the end of this year," he said. "As soon as you get one customer in the door, it’s easier to get the second."

Pacific Coast

The project, which proposes to build the terminal at a former pulp mill site on British Columbia’s Pacific Coast, would have a total capacity of about 2.1 million tons per year. It plans to buy natural gas from the market to freeze and ship to buyers.

Guangzhou Gas and Woodfibre signed a memorandum of understanding in September 2014 for annual LNG supplies of 1 million tons over 25 years starting in 2017, according to the Chinese company’s website.

Guangzhou Gas is a unit of Shanghai-listed Guangzhou Development Group Inc., which is majority-owned by the city government and runs businesses from utilities and infrastructure to retail. Guangzhou Gas served 1.43 million customers in the city with annual sales of 1.12 billion cubic meters in 2014, according to its website.

Guangzhou Development board secretary Zhang Xueqiu didn’t answer two calls Tuesday to his office seeking comment.

While Woodfibre faces competition from supplies in the southern U.S. and East Africa, it has an advantage with Guangzhou Gas because of the ties the company has in the Chinese province in pulp, paper and other projects, Giraud said.

"At the end it boils down to price," he said. "It’s tough but we are confident."

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