Greg Kist says he is prepared to deal with the volatility of natural gas

Pacific Northwest eyes Asian markets for LNG exports

February 24, 2014

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Greg Kist
Photograph courtesy of Pacific Northwest LNG

Greg Kist isn’t worried that the enticing natural gas price differential between North America and Asia might disappear. The president of Pacific NorthWest LNG, a proposed LNG export facility near Prince Rupert, B.C., believes his business is structured to deal with the volatility of natural gas prices on both sides of the Pacific.

Alberta Oil: Petronas won’t give an ultimate decision on whether it will actually proceed with the Pacific Northwest LNG project until late 2014. Is not the BC LNG industry developing too slowly to compete with fleet-footed competitors in the USA and Australia?
Greg Kist: Pacific NorthWest LNG has a very assertive timeline to reach our final investment decision in late 2014. That decision is contingent upon the completion and approval of thorough regulatory reviews, both federally and provincially, and completing the early design engineering of the proposed facility by our three FEED contractors.

AO: Would the Pacific Northwest LNG’s business model be robust enough to handle the gradual disappearance of the trans-Pacific natural gas price differential?
GK: Our project is designed to be a fully integrated project with all partners proportionately participating in each component of the LNG value chain.  We believe this creates a fully-aligned interest among partners and enhances the Project’s opportunity to benefit regardless of the point in the commodity price cycle.

AO: Although LNG poses lower environmental risks for marine transport than diluted bitumen, what measures has Pacific Northwest LNG undertaken to mitigate those risks?
GK: The industry has over 50 years of experience and all LNG vessels must meet stringent international, national and regional safety codes. According to the International Group of Liquefied Natural Gas Importers (GIIGNL), there have been more than 71,000 loaded LNG voyages – totaling more than 151 million miles to date without a major incident at sea or port.

Pacific NorthWest LNG is working with the Prince Rupert Port Authority (PRPA) to determine best practices for LNG carriers visiting the export facility.  Additionally, all vessels will be guided to the terminal by tugs and government-certified BC marine pilots.

AO: Cross-cultural corporate challenges are the norm in the age of global M&A. Has Pacific NorthWest LNG and Petronas taken a special approach to handling them?
GK: We have a dedicated team of professionals drawn from all around Canada and the world and we are drawing upon LNG expertise from PETRONAS who have a great deal of experience working in international markets with existing supply relationships in the Asian markets. We are all focused on the same goal and have the added benefit of leveraging the unique strengths of all of our employees.

AO: Will Canada develop its own cutting-edge LNG expertise or will this always have to be pulled in from overseas?
GK: As part of our commitment to hiring and training Canadian workers for our project, Pacific NorthWest LNG is in the process of recruiting and hiring up to 30 Canadian engineers. They will be embedded with the three selected engineering firms, who all have global expertise in LNG engineering.

The first group of Canadian engineers have already arrived to work with our FEED contractors in London and Rome, with more arriving in the new year.

Following the completion of the FEED work, the approximately 30 Canadian engineers will return to Canada where they will work out of PNW LNG’s head office in Vancouver or on-site in the Prince Rupert area.

With such a strong LNG industry forming in BC, this is an opportunity to make BC a future centre of LNG excellence.

AO: How much input have LNG project developers such as PNW LNG had in the creation of B.C.’s LNG tax regime?
GK: We have been in regular communication with the provincial government regarding  its potential tax policy.

AO: How do you respond to environmentalists in B.C. who see the nascent LNG industry thwarting the province’s ambitions/commitments to reduce emissions?
GK: We believe that LNG can be a very positive contributor to lowering overall emissions around the world.

The world demand for electricity more than tripled between 1973 and 2010 and demand for energy is forecast to increase by almost 50 per cent from 2007 to 2035. Our view is that LNG will continue to be seen as a reliable source of energy for power generation.

The world is using a greater percentage of natural gas to meet new demand – natural gas used to generate electricity has almost doubled (12.1% to 22.2%) while coal has remained relatively flat.

Given the growth in power generation demand world-wide, we believe that LNG is an ideal fuel and using LNG to generate electricity result in lower GHG emissions than would be generated from coal fired facilities. Constructing LNG terminals to export natural gas to global markets helps reduce the need to build new coal-fired generation as well.

AO: In view of your company’s requirement for up to 3,500 construction workers for its LNG terminal alone, how do you plan to work around the tight labour constraints in Northwest B.C.?
GK: Our first priority will be to provide as many local employment opportunities as possible. We have the ability to provide education and training opportunities for local citizens so they can fill many of the local jobs.

Following a local search, we intend to expand our search to fill our labour requirements throughout British Columbia, Canada and if necessary, the United States and internationally.

AO: Could you explain further your depiction of negotiations with First Nations as “intense”? Could these negotiations become an irresolvable sticking point?
GK: Pacific NorthWest LNG is committed to working with area First Nations and continues to have on-going engagement and consultations.  We would describe these as covering a wide range of areas where we see tremendous opportunities to work closely with First Nations in our project development.

 

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