Pembina eyes near-term Canada opportunities after US LNG project challenges

Houston — Canada's Pembina will focus on growth at home in the near-term as it retrenches after a challenging year in which uncertainty increased over the future of a proposed US liquefaction project.

The company is not giving up on the Oregon project it inherited when it purchased Veresen in 2017, though it can no longer predict when it will be able to overcome the regulatory and commercial barriers to construction.

During an investor conference call Feb. 26, a day after disclosing the company took a substantial writedown on its investment in Jordan Cove and several other projects, Pembina officials said they hope to get the new ventures off the ground at some point.

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For now, however, the company is keeping its eyes largely on Canada, especially when it comes to any potential merger and acquisition opportunities, CEO Michael Dilger said.

"If we did anything, we would probably be looking more Canada-side than States-side," he said.

Asked about the new US administration's posture towards fossil fuels, Dilger sounded an optimistic note, even after President Joe Biden revoked a key permit for TC Energy's Keystone XL heavy crude pipeline.

"Biden came in and most people were predicting that," Dilger said. "We were on record some time ago – advantage Canada in that scenario. We believe that to be the case looking forward."

Jordan Cove would benefit from being the first LNG export facility on the US West Coast, an advantage because of its shorter shipping distance to East Asia compared with existing terminals on the Gulf Coast. Pembina, and the original developer of the project that it later acquired, Veresen, encountered significant challenges over the last eight years in securing necessary regulatory permits and commercial agreements to be able to sanction construction.

In a statement accompanying its fourth-quarter 2020 financial results, Pembina said it recognized an impairment in the value of certain assets, including Jordan Cove, Ruby Pipeline and a petrochemical facility investment. With regard to Jordan Cove, Pembina cited the impact of current regulatory and political uncertainty. More generally, it cited market impacts from the coronavirus pandemic, including significant price volatility.

The first US Federal Energy Regulatory Commission permit certificate application for Jordan Cove and the affiliated Pacific Connector feedgas pipeline was filed in 2013, then rejected in 2016. The second application was filed in 2017. In March 2020, FERC voted 2-1 to conditionally approve the certificate for the export terminal and feedgas pipeline. The project still faces state regulatory hurdles in Oregon and fierce opposition from environmental groups and some US lawmakers.

"We remain committed to accessing global markets," Dilger said on the investor call.