Ksi Lisims LNG inches closer to green light by turning German utility agreement into firm contract

A rendering of the Ksi Lisims LNG project in northern B.C.

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Ksi Lisims LNG has turned another letter of intent from a potential customer into a binding, 20-year sales contract that moves the potentially $30-billion liquefied natural gas project on B.C.’s North Coast closer to a final investment decision.

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The deal signed this week will see German utility Securing Energy for Europe buy up to one million tonnes per year of LNG from Ksi Lisims over the term, starting in the early 2030s. The amount represents about eight per cent of Ksi Lisims’ projected 12 million tonnes per year capacity but, added to previous firm contracts, means it has secured commitments for 58 per cent of its output with other potential deals in process.

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It’s still short of the commitments for 70 to 80 per cent of output Ksi Lisims has said would make project backers more comfortable about an investment decision. However, CEO Davis Thames said in a statement that “momentum behind Ksi Lisims LNG is stronger today than at any point in its development.”

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“We are excited about the months to come,” he added.

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The latest Ksi Lisims development comes four weeks after LNG Canada announced its decision to green-light Phase 2 of its massive liquefaction project at Kitimat, which will increase its capacity to 28 million tonnes per year from its initial 14 million tonnes.

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And far from taking enthusiasm away from Ksi Lisims’ proposal, 150 kilometres north of LNG Canada 2, analysts believe market conditions still favour the construction of additional LNG capacity on Canada’s West Coast.

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“At the time when they were launching this project, it was all very uncertain,” said analyst Alex Munton of the Houston, Tex., firm Rapidan Energy Group. “But now, in the context of the situation in the Middle East and huge disruption to LNG … Western Canada stands quite tall in terms of places to diversify supply.”

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Diversification was the case Securing Energy for Europe (SEFE) made when it signalled its intent with a “heads-of-agreement” deal last May.

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On Tuesday, SEFE chief commercial officer Frederic Barnaud reiterated that the binding deal “is an important step in further diversifying SEFE’s global LNG portfolio” for its utility customers in Europe.

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The agreement will see SEFE purchase LNG on a “free onboard” basis, which will leave it free to use the fuel as it sees fit and expectations are that it would likely trade cargoes with LNG-users in Asia in exchange for supplies from producers that are closer to Europe.

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“Together with Ksi Lisims, we will help strengthen energy security while advancing the transition to a more sustainable energy system,” Barnaud said in a statement.

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To date, besides SEFE, Ksi Lisims has signed long-term binding deals with the German utility Uniper, Shell Plc and a subsidiary of French energy giant TotalEnergies, each for two million tonnes per year.

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Outstanding are non-binding initial agreements with the Australian firm Santos and British firm Centrica Plc, each for one million tonnes per year.