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CEO says Iran war has bolstered the outlook for the Ksi Lisims LNG project which will need a pipeline partner
Two years after exiting a key pipeline project tied to a proposed new liquefied natural gas terminal on British Columbia’s coast, TC Energy Corp. chief executive François Poirier says the company could be open to getting involved again.
Poirier said recent geopolitical tensions in the Middle East have underscored the value of Canadian LNG, bolstering the outlook for the Ksi Lisims LNG project near Prince Rupert, B.C. If it proceeds, he said, the pipeline intended to supply it — the Prince Rupert Gas Transmission line — will require an “experienced operator” to build and run it.
“Would we be interested in playing that role if they were to approach us? We might be, but we have not had those conversations, and it would depend on what other opportunities we have at the time,” he said.
“There is a need for them to partner with somebody, and my view is that the odds of that project getting permitted are getting better by the day, given the overall tone in the marketplace.”
Poirier made the comments in an interview this week as the pipeline company is marking its 75th anniversary at a moment when global energy markets have been rocked by fighting in the Middle East that has choked exports of oil and natural gas from the region.
Shipments to Asia from Canada’s first liquefied natural gas export terminal, the Shell Plc-led LNG Canada project in Kitimat, B.C., are up sharply so far this month, according to data published by RBC Capital Markets, amid concerns about potential supply shortages.
“Given global developments, the prospects of (Ksi Lisims LNG) moving forward are improving because Asian buyers in particular will value a path for LNG from the West Coast of Canada into their markets that avoids the areas where there is currently some geopolitical tension,” the executive said.
Despite what could be an improving outlook for Canadian LNG, Poirier emphasized the company has been focused on investments in U.S. projects in recent years, where the buildout of data centres and LNG facilities has driven strong demand for natural gas pipelines. The U.S. has offered better risk-adjusted returns than Canada, where permitting timelines are longer, he added.
Analysts expect TC will continue to concentrate on lower-risk pipeline expansions in the U.S., including a potential major expansion of its Columbia Gas Transmission system to serve surging data centre growth in the Midwest.
In Canada, the company could expand its Coastal GasLink pipeline in B.C. if LNG Canada proceeds with a second phase — a project that would double the facility’s output — with a final investment decision expected later this year.
“The government would like to see Canada diversify its markets and its end-use customers,” Poirier said. “The most bang for your buck, in terms of expanding our infrastructure in order to increase that global market reach, would be an export pipeline to the West Coast.”
It was significant cost overruns related to Coastal GasLink’s construction that prompted TC to begin selling assets — including the Prince Rupert Gas Transmission line — four years ago in a bid to shore up its balance sheet. The company ultimately sold the project to the Nisga’a Nation and Houston-based developer Western LNG in March 2024.
The pipeline giant has since largely recovered, reining in debt while focusing on smaller system expansions, particularly in the U.S., where it says returns have been stronger, rather than on new mega-projects.
But analysts say TC may now be preparing to loosen its purse strings, potentially lifting its self-imposed $6 billion annual spending cap as it eyes new growth opportunities.
A recent settlement with customers over tolls on the company’s Canadian Mainline natural gas pipeline could improve the outlook for investment in Canadian projects in particular. Combined with an earlier agreement on its NGTL system, it is “potentially paving the way for a more attractive deployment of capital in Canadian natural gas pipelines moving forward,” RBC Capital Markets analyst Maurice Choy wrote.
Still, analysts say the company is likely to be cautious about returning to a major new pipeline build in B.C., TD Cowen analyst Aaron MacNeil said.
“There’s a lot of scar tissue there, and among investors as well,” MacNeil said. “They’d have to have the right contractual protections; they’d have to have the right buy-in from stakeholders, the returns would have to be there. You’d have to check a lot of boxes before they went with something like that.”
Some experts say the conflict — and its potential impact on global oil and LNG flows — could create a new opening for Canadian energy exports.
Even before U.S. and Israeli strikes on Iran sent energy prices soaring, both LNG Canada Phase 2 and Ksi Lisims LNG had been referred to Ottawa’s major projects office as part of the federal government’s push to diversify export markets.
“It raises the interest in investing in energy in countries where there’s political stability, where there’s no choke point like there is in the Strait of Hormuz, and there’s no geopolitical risk,” Gitane De Silva, former chief executive of the Canada Energy Regulator, said Thursday.
“I think people are asking the question, do we want to continue to be that beholden to a volatile part of the world, or do we want to seek different countries where we can buy reliable energy.”
De Silva said it would be “logical” for the Nisga’a Nation and Western LNG to partner with an established pipeline company, potentially allowing them to maintain ownership while making use of TC’s expertise and prior knowledge of the project.
The Prince Rupert Gas Transmission line which is planned to transport two billion cubic feet per day of natural gas from northeastern B.C. to the West Coast, was initially proposed in 2013 by TC Energy, then known as TransCanada, to supply the Petronas-backed Pacific NorthWest LNG project.
The Nisga’a Nation and Western LNG eventually took over the LNG project after Petronas exited in 2017, and subsequently acquired the permits and certificates for its pipeline as well.
“At the time, we were capital constrained and we actually felt — and still do — that an Indigenous-led project would have the best odds of (proceeding) and we still feel that that was a good judgment on our part,” Poirier said.
Now, Ksi Lisims’ prospects may be improving, he said.
But would TC have the appetite to build another major pipeline in B.C.?
“As opposed to theorizing on what would happen, I would prefer to wait and see when and if they come to us,” he said.
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