LNG Canada deal hasn't stimulated investor interest: Canoe's Tahmazian
Royal Dutch Shell Plc’s commitment to invest in the largest private-sector project in Canada’s history and a new trade deal with the U.S. and Mexico show the country is open for business again.
But neither are likely to help Trans Mountain, the troubled oil pipeline project that has epitomized the country’s inability to get big projects done and for which Prime Minister Justin Trudeau needs to find a buyer if it’s ever to get it built.
"The comparisons between Trans Mountain and LNG Canada are apples and oranges," British Columbia premier John Horgan said in an interview after the gas project’s signing ceremony with Trudeau in Vancouver Tuesday.
Kinder Morgan Inc. sold the oil pipeline to the government for $4.5 billion after the U.S. energy giant said it faced "unquantifiable" political and regulatory risk. Trudeau’s plans to quickly find a buyer who would build the expansion project were derailed by a federal court ruling that quashed its permits. The bungle prompted cries that Canada had become uninvestable and resource projects undoable -- quelled by the massive LNG commitment announced this week.
Shell and its four Asian partners signed off Tuesday on LNG Canada, a record $40 billion liquefied natural gas project that the fiery B.C. premier has been touting while simultaneously battling Trudeau’s government to thwart Trans Mountain which is critical to getting Canada’s landlocked bitumen in Alberta to B.C.’s coast for export.
"Trans Mountain is the real here-and-now situation that has everything to do with the problems of our country," Rafi Tahmazian, a senior portfolio manager overseeing energy investments at Canoe Financial in Calgary, said in an interview with BNN Bloomberg. "The LNG Canada project is a beneficiary of how we used to do things."
While Horgan bantered jovially with Trudeau as they each praised the other for finding common ground on LNG Canada there’s no indication they’ll find that on Trans Mountain.
For one, there’s the difference between the two fuels, says Horgan. LNG evaporates in a spill while diluted bitumen is messier and less predictable. It also comes down to what’s in it for British Columbia: 10,000 jobs created during construction of the LNG project versus a roughly $7 billion expenditure on a pipeline "to move an admittedly Alberta resource to tidewater and then to offshore markets," says Horgan.
Gas for the new LNG terminal will come in part from northeast B.C. Meanwhile the inability to get Alberta oil out of the country has contributed to a discount of about $41 of Canadian to the U.S. oil.
But most importantly, in a province where indigenous groups have never formally ceded their ancestral lands to Canada, it comes down to aboriginal support, he says.
"Shell and LNG Canada were able to realize benefit agreements from wellhead to water line and Trans Mountain was not," said Horgan. "I think that speaks for itself.”
The federal court’s decision to quash Trans Mountain’s approval asked in its ruling for additional indigenous consultation. Trudeau’s government has subsequently put off the search for a buyer and resolved to restart the approval process.
"We’re not at the time where we think solicitation of a buyer is the appropriate next step," Finance Minister Bill Morneau said Tuesday. "We need to acknowledge that doing things the right way is the only way to get it done, consulting with indigenous peoples so that there’s meaningful engagement."
Canada may need to take a different public policy approach to bitumen compared with LNG, said James Moore, a former industry minister and now a senior adviser at law firm Dentons Canada LLP.
The LNG deal is “blueprint about cooperation and collaboration,” Moore said. “It’s desperately needed just on a global investor confidence basis to have these kinds of projects finally be approved.”
--With assistance from Josh Wingrove.