Cedar LNG secures off-take, issues limited notice to proceed
Pembina Pipeline and Haisla Nation said April 4 they had secured long-term commercial offtake support for their 3.3mn tonnes/year Cedar LNG project near Kitimat, BC, and had issued a limited notice to proceed (NTP) to Samsung Heavy Industries (SHI) and Black & Veatch, the project’s EPC contractors.
The NTP directs SHI and Black & Veatch to finalise engineering and design and start construction of Cedar LNG’s floating LNG facility (FLNG). Pending a final investment decision (FID), the FLNG unit will be installed at the project site, on Haisla Nation territory in the Douglas Channel, where early site work is expected to begin in May.
A 20-year take-or-pay liquefaction tolling services agreement has been signed with Montney producer ARC Resources for 1.5mn tonnes/year of LNG. Under terms of the tolling agreement, ARC will supply about 200mn ft3/day of natural gas to Cedar LNG, to be delivered through the recently completed Coastal GasLink pipeline.
“The Cedar LNG project will play a critical role in bringing low-cost, low-emissions Canadian natural gas to the world, while delivering economic benefits to communities and Canadians here at home,” ARC Resources CEO Terry Anderson said. “We are proud to partner with Cedar LNG, the Haisla Nation and Pembina Pipeline who share our commitment to responsible energy development.”
ARC has also entered into a non-binding Heads of Agreement (HOA) with an investment-grade company with extensive experience in the LNG value chain for the associated LNG offtake, outlining the terms of an anticipated 20-year LNG sale and purchase agreement (SPA) for the entirety of ARC’s LNG from Cedar LNG, commencing with the start-up of the project. ARC anticipates finalising the SPA by the end of this year.
The agreement with Cedar LNG is the third long-term deal ARC has entered into to provide exposure to international natural gas markets. In 2022, it entered into an agreement to supply 140mn ft3/day of natural gas to Cheniere Energy’s Corpus Christi Stage 3 expansion, with pricing linked to the Japan Korea Marker (JKM), and the following year entered into a similar agreement to supply 140mn ft3/day to Cheniere’s Sabine Pass LNG expansion project, with pricing linked to the Dutch Title Transfer Facility (TTF).
Pembina has executed an identical bridging agreement with Cedar LNG for an additional 1.5mn tonnes/year of LNG, with the capacity to be assigned to a third party once a final investment decision (FID) has been taken on the estimated US$3.4bn project, US$2.3bn of which is under a fixed-price, lump-sum agreement with SHI and Black & Veatch.
Pembina confirmed it still intends to make FID on the floating LNG project by the middle of this year, with commercial operations expected in the second half of 2028.
“We are extremely pleased to be working with ARC Resources to deliver Canadian LNG to world markets, given their expertise and track-record as a responsible producer of natural gas and knowledge of global LNG dynamics,” Pembina CEO Scott Burrows said. “Working together, the Haisla Nation, ARC Resources, and Pembina are committed to making an indigenous majority-owned LNG facility a reality while simultaneously being a leader in environmental stewardship and delivering low carbon energy solutions.”
With the bridging agreement in place, Cedar LNG is effectively fully-contracted with investment grade counterparties, allowing it and Haisla Nation to begin their respective financing processes, which reduces Pembina’s exposure to future cash outlays and financial assurances, maintains the project’s FID and in-service timing, preserves the validity of the EPC contract, and avoids incremental delay-related cost escalation risk.
“Today’s achievements mark an exciting time for our Nation as we seek to make Cedar LNG – the world’s lowest carbon and first indigenous majority-owned LNG Facility – a reality in the coming months,” Haisla chief councillor Crystal Smith said. “I am incredibly grateful to our Nation, all levels of government, Pembina and all our partners who have supported our journey to advance a project that protects our environmental and cultural values, while delivering prosperity for decades to come.”