Pembina lays groundwork for LNG project in Canada amid Jordan Cove hurdles in US

Houston — Canada's Pembina Pipeline is considering developing or taking a stake in one or more liquefaction projects in British Columbia as it faces challenges securing regulatory permits and sufficient commercial support for its proposed Jordan Cove LNG project in Oregon, executives said Friday.

For now, the company is sticking with Jordan Cove, which it inherited when it acquired Veresen in 2017. However, it has cut development spending over the last two years as it decides whether to advance to construction.

Its move to consider other LNG growth opportunities at home suggests a willingness to hedge its bets on the US. As a major pipeline operator in Canada, Pembina has the infrastructure network to feed liquefaction facilities and to be an exporter itself. In the US, pipeline operators Kinder Morgan and Dominion Energy have become LNG exporters.

While the market for LNG has been beset in recent months by low international prices, weaker than expected demand in key end-user markets and trade flow restrictions from the deepening global crisis over the coronavirus outbreak, Pembina still sees a path to capitalize on forecasts for tightening supplies around the middle of the decade. A foothold on the West Coast of North America would give it a much shorter shipping route to Asia than from US Gulf Coast export terminals.

"It still intrigues us," CEO Michael Dilger said of Jordan Cove during a conference call with investors to discuss Pembina's latest financial results. "Because our cost to stick with it is nominal, and it has huge upside. And so the math is pretty easy."

At the same time, he added, "We're looking at a bunch of locations in BC. There's attributes of lower risk with some existing projects that are appealing. But, those are not free. So, just weighing all that out, looking at really what the gating criteria is for BC LNG. If, for example, it was determined that access to green power was a gating issue, then that's something you have to look at. First Nations support is something you have to look at. So all the locations, we're putting them through our set of key attributes, and we'll try to move something forward."

'Laying the groundwork'

Dilger said the company is settling in for a long-term review process of its LNG options going forward.

"I'm not aware of any major infrastructure projects in Canada, or for that matter anywhere on the West Coast of the US, that gets done quickly," he said. "You go through the regulators, then you go through the courts. And so these are kind of mid- to end decade projects that we're looking at. And we're just laying the groundwork now because it just takes that long."

That's certainty been true for Jordan Cove and the affiliated Pacific Connector feedgas pipeline, which have now been in permitting queues in Washington and Oregon for seven years.

The projects' first Federal Energy Regulatory Commission permit application was filed in 2013, then rejected in 2016. The second application was filed in 2017. On February 20, FERC voted 2-1 against an order to grant certificate approval. Pembina expects another vote by late March. As the FERC permit remains in limbo, Jordan Cove also faces permitting hurdles with state regulators in Oregon.

"We want to be in the LNG business," Dilger said.