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Opposition from Aboriginal groups could delay LNG projects in Canada's British Columbia

Vancouver — Planned LNG projects in Canada's British Columbia could face delays and major cost overruns unless a "concerted" effort is made by developers to win over support of Aboriginal groups in the province, industry officials said Wednesday.

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"With some 203 First Nations groups, BC [British Columbia] is primarily Indian land and we control the resources and also have rights guaranteed by the [Canadian] constitution," Stewart Phillip, president of the Union of BC Indian Chiefs said at the 3rd Annual Canadian LNG Exports Conference in Vancouver.

Developers of LNG facilities will need to understand that and respect the rights of Aboriginals or else face court cases or demonstrations, he said.

"Foreign corporations come to BC, talk to the premier [Christy Clark] and cut a deal. But they have duties to consult Aboriginals and related stakeholders that they do not take seriously. They are talking to the wrong people," he said.


"The land we have should not be used by companies to extract resources and make money. The jury is still out for the development of LNG facilities in BC and we feel it will be a fading opportunity unless they consult us," Phillip said.

Due to lack of a treaty between the Canadian government and First Nations bands, development of oil and gas projects in the province has become a stumbling block with nearly 50 Aboriginal groups -- including the Yinka Dene Alliance, the Wet'suwet'en and the Saik'uz bands -- opposing Enbridge's Northern Gateway crude oil pipeline since 2010.

The 731-mile, 525,000 b/d pipeline will run from Alberta to Kitimat in British Columbia and open up a much touted export route for Canadian crude to Asia.

Phillip's statement came in the wake of Calgary-based Progress Energy stating last week that it was facing a 40% cost escalation of a gas feedstock pipeline for its LNG project in British Columbia following severe opposition from the Gitxsan First Nations group.

The pipeline is estimated to cost C$5 billion ($4.2 billion) and is designed to deliver 2 Bcf/day to 3.6 Bcf/d of gas.

Petronas, which owns 100% of Progress, said late March it will take a final investment decision for its Canadian LNG facility of capacity 19.7 million mt/year.

An FID may be a "big deal" for a developer, but for a First Nations band a "bigger deal" will be the respect of their rights and title to the lands, Phillip said.

STEELHEAD FINDS WAY OUT

"Any community that is in the vicinity of a project development area will be impacted, but developers will need to take steps to reduce risk and add value to their mega investments," Nigel Kuzemko, CEO of Steelhead LNG said at the event, noting structuring LNG projects are "complicated and there are ways of ensuring First Nations' participation."

His company, which is currently carrying out an environmental assessment for a 24 million mt/year LNG facility to be built in the province, signed last summer an opportunity development agreement with the Huu-ay-aht First Nations band.

"We are working closely with them [Steelhead] to develop the project to be built over our lands," John Jack, a councillor for Huu-ay-aht said.

With a population of some 700 people, the band has control over 8,000 hectares on the Vancouver Island, including Sarita Bay, where four LNG liquefaction trains will be built by Steelhead, Jack said.

Steelhead plans to build the facility in two phases, each of 12 million mt/year, with first LNG being produced in 2022, Kuzemko said.

Steelhead has set up a five-member project development panel for the planned facility, Jack said, that includes two nominees from his band.

A successful collaborative deal with a First Nations band will come a long way in ensuring an LNG project is built on time and within budget, Kuzemko said.

But a challenge to be dealt with is the log-lead time it will take to finalize an investment decision.

"We are three-to-four years away from FID. But our deal with the Huu-ay-aht group has put us on a solid foundation," he said.

--Ashok Dutta, newsdesk@platts.com
--Edited by Haripriya Banerjee, haripriya.banerjee@platts.com