Pembina to take 50 percent stake in Cedar LNG in partnership with Haisla Nation
The Haisla Nation and Pembina Pipeline Corporation have announced a parternship agreement whereby Pembina will become the Haisla Nation's partner in the development of the proposed Cedar LNG Project. The Project is strategically positioned to leverage Canada's abundant natural gas supply and British Columbia's growing liquefied natural gas infrastructure to produce industry-leading low-carbon, low-cost Canadian LNG for overseas markets. Cedar LNG will be the largest First Nation-owned infrastructure project in Canada and will have one of the cleanest environmental profiles in the world.
"It was important for us to find a partner with the same values of environmental protection and community-centered development," said Crystal Smith, Haisla Nation, Chief Councillor. "Pembina's long history of safe, reliable operations, and engagement with local communities made them the distinct choice for Cedar LNG. With a strong partnership, Cedar LNG will bring tremendous economic opportunities and benefits ensuring the Haisla people have control of our own future."
"This partnership is the result of meaningful collaboration with the Haisla Nation to deliver responsibly-developed, world-class energy," said Stu Taylor, Pembina's Senior Vice President, Marketing and New Ventures & Corporate Development Officer. "We believe that environmental stewardship, Indigenous prosperity and inclusion, and mutual economic benefit are the cornerstones of future energy infrastructure development in Canada, and we are honoured to have the opportunity to work with the Haisla Nation to produce Canadian LNG."
Pembina's President and Chief Executive Officer, Mick Dilger, added, "We have worked with the Haisla Nation on and off for over a decade with three different Haisla Nation leaders, maintaining a positive relationship throughout that time. I am simply delighted that this long-term relationship has led us to this tremendous opportunity to finally partner with the Haisla Nation. At Pembina, our goal is to leave communities in a better situation than we find them, which is what we have recently done in Prince Rupert, and what we will do here. This Project will bring a second product to global markets, consistent with our stated strategy, with more to come."
Cedar LNG Project Overview
Cedar LNG is a proposed floating LNG facility in Kitimat, British Columbia, Canada, within the traditional territory of the Haisla Nation. The Project is located on Haisla Nation-owned land in the Douglas Channel, one of the principal shipping routes on the British Columbia coast. The Project will create jobs, contracting and other economic opportunities for the Haisla people, the local community and Indigenous Nations, and the region. Up to 500 people will be working at the Cedar LNG site at the peak of construction and approximately 100 people will be working at the facility full-time once operational.
The Project will have one of the cleanest environmental profiles in the world. Cedar LNG's floating design offers significantly less environmental impact on the Douglas Channel coastline and the facility will be interconnected to the existing BC Hydro transmission system, utilizing renewable electricity to make Cedar LNG one of the lowest emissions intensity LNG facilities globally.
The Project will have a liquefaction capacity of approximately three million tonnes per annum of LNG and will source natural gas from the prolific Montney resource play in northeast British Columbia. Cedar LNG has secured a long-term transportation agreement on the Coastal GasLink pipeline for 400 million cubic feet per day of firm capacity. Natural gas will be delivered to the Project site through an approximately eight-kilometre-long pipeline that connects to the Coastal GasLink pipeline.
Liquefaction of natural gas will occur on a floating LNG facility, which will be moored in the Douglas Channel. One of the many advantages of Cedar LNG is that the floating facility will be modularized and constructed at an existing shipyard in Asia, which will lower the capital cost and construction risk of the liquefaction facility, reduce the Project's footprint, and minimize the disruption to the local community during the construction period. The technical concept for Cedar LNG is based on a proven, simplified design utilized in other floating liquefaction projects, enabling lump-sum turnkey contracting for the majority of the Project's costs. As a result, Cedar LNG represents among the lowest cost LNG value chains for delivery into the Asian market.
Cedar LNG will largely target the Asia-Pacific market to maximize the Project's geographic shipping advantage compared to U.S. Gulf Coast LNG projects, which are subject to the high costs and risks of transiting the Panama Canal. Cedar LNG's low-cost value chain, combined with its low emissions intensity, positions the Project favorably to deliver to Asian countries with large energy needs and aggressive emissions reduction targets. The Project provides a connection for Western Canadian Sedimentary Basin natural gas to international markets and will contribute to the displacement of coal as an energy source in Asia.
The estimated gross project cost of Cedar LNG is US$2.4 billion, or approximately $3.0 billion in Canadian dollars based on an exchange rate of 1.25 Canadian dollars per U.S. dollar. Cedar LNG will leverage Pembina's existing LNG off-taker relationships to secure long-term, tolling-based offtake arrangements with LNG buyers. Returns are expected to be similar to other large-scale capital projects undertaken by Pembina.
Cedar LNG has completed initial work that has allowed regulatory and engineering work streams to be well advanced for a project at this stage. The Project has secured its LNG export license from the Canada Energy Regulator and is undergoing environmental assessments by the provincial and federal governments.
Cedar LNG expects to make a final investment decision ("FID") in 2023. Subject to additional factors, including regulatory and environmental approvals, the expected in-service date for the Project is planned for 2027.
Under the agreement, Pembina will acquire the equity interests in Cedar LNG currently owned by PTE Cedar LP and Delfin Midstream Inc., with a resulting approximate ownership of 50 percent each between the Haisla Nation and Pembina. Further, Pembina will assume operatorship of the Project going forward and has assembled accordingly a world-class floating LNG team.
Pembina expects to invest approximately US$90 million in Cedar LNG over the next 24 months, prior to an FID, which includes costs to acquire its interest in the partnership as well as pre-FID development costs.