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Final investment decision on Cedar LNG coming in Q1: Pembina Pipeline

Pembina’s updated guidance optimistic for growth in B.C., Alberta
Artist's rendering of the Cedar LNG project in Kitimat.

Pembina Pipeline Corp. (TSX:PPL, NYSE: PBA), the Haisla First Nation’s main industry partner in the $3 billion Cedar LNG project in Kitimat, expects the Haisla to take a final investment decision on the project in the first quarter of 2024.

In a business and guidance update for 2024, Pembina notes it expects to spend roughly $210 million on the Cedar LNG project in 2024 on “pre-FID contributions.”

Pembina’s update paints a generally rosy picture for oil and natural gas producers in the Western Canadian Sedimentary Basin (WCSB).

“Momentum within the WCSB is expected to continue into 2024 and beyond and Pembina is well positioned to benefit from what it expects to be a transformational period in the Canadian energy industry,” the company says in its updated guidance for 2024.

“Over the next several years, Pembina sees the potential for mid-single digit annual volume growth across the WCSB, driven by near term catalysts, including up to approximately 2.8 billion cubic feet per day of new natural gas export capacity from new West Coast LNG projects, 590,000 (barrels per day) of new crude oil export capacity from the expected completion of the Trans Mountain Pipeline expansion, as well as potential new developments in the Alberta petrochemical industry.”

Pembina expects to spend $880 million on capital investments in 2024, which the company says “reflects growing volumes.” Some of the spending will be in “core business,” including “continued investment in northeast British Columbia liquids egress.”

The “wet” gas produced in the Montney of B.C. is rich in liquids, like light oil, condensate (used to dilute bitumen) and propane. Pembina has been working on an expansion of its NEBC pipeline system.

“Pembina continues to progress the previously disclosed 40,000 barrels per day… expansion of its NEBC pipeline system and evaluate additional pipeline and terminal infrastructure in the region," the company says in its update.

"Pembina continues to evaluate further expansions to support NEBC volume growth, including new pipelines and terminal upgrades within the NEBC Pipeline system and downstream systems between Taylor, British Columbia and Gordondale, Alberta.” 

In addition to the anticipated increased capital spending on its core operations, Pembina is also expecting an additional $280 million in capital spending this year on new projects.

“Pembina is in development of additional growth projects, which could add up to $280 million to the 2024 capital investment program, inclusive of pre-final investment decision contributions related to the Cedar LNG project," the company says in its update.

"This includes approximately $210 million related to pre-FID contributions for Cedar LNG and approximately $70 million related to growth projects to accommodate growing WCSB volumes and incremental demand for transportation and gas processing services.”

The Cedar LNG project received its provincial and federal environmental approvals in March this year. Pembina notes that Cedar LNG recently achieved “a significant milestone,” in the signing of a heads of agreement in November with Samsung Heavy Industries Co. and Black & Veatch Corporation.

Pembina notes that this agreement gives Cedar LNG “exclusive” access to shipyard capacity for the construction of modules for the floating LNG terminal it plans to build in Kitimat.

Cedar LNG had been aiming for a final investment decision in the fourth quarter of 2023.

“Given the complexity and sequencing of aligning the multiple work streams required to facilitate the project financing, an FID is now expected by the end of the first quarter 2024,” Pembina says.

The Cedar LNG project is owned by the Haisla First Nation, which had negotiated an agreement with LNG Canada to access some of the natural gas that will be supplied to Kitimat via the Coastal GasLink pipeline for the Cedar LNG project.

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