A major proposed liquefied natural gas project in British Columbia — which has now cleared a key regulatory hurdle — is seen by many in the oilpatch as even more critical for Western Canada’s gas producers than LNG Canada , the country’s first export terminal. But analysts warn its future remains uncertain. Ksi Lisims LNG , the First Nations-led project on B.C.’s northwest coast, received key environmental approvals last week from provincial and federal governments — although a final investment decision on the project is still to come later this year. Despite LNG Canada Phase 2 being anointed as a potential “nation-building” project by Prime Minister Mark Carney’s government for fast-tracking, Ksi Lisims LNG “may be the most Canadian project of all because of its Indigenous participation,” said Ian Archer, a natural gas analyst at S&P Global Inc. “And the backers of it are more of these smaller, independent, Canadian-headquartered companies — and for producers like them, this is a much bigger deal than LNG Canada.” At 12 million tonnes per year (Mtpa), Ksi Lisims is the second-largest LNG project currently proposed for the B.C. coast. It’s a joint venture between the Nisga’a Nation, U.S. developer Western LNG and Rockies LNG — a consortium of mostly Canadian independent gas producers, which have each committed to supply volumes if the project proceeds. While the Canadian oilpatch has loudly championed LNG Canada — owned by global or state-owned Asian energy companies including Shell plc, Petronas, Petrochina, Mitsubishi Corp. and Korea Gas Corp. (KOGAS) — most of the benefits will flow first to its equity partners, all of which are based outside the country. Analysts and producers say that’s appropriate given the enormous capital investment that was required to build the facility, but they point out that three of LNG Canada’s equity partners in Phase 1 have their own upstream production in Canada and, crucially, have the right to move their own volumes through the facility. As a result, many Canadian producers remain on the sidelines, watching as the partners secure higher returns from premium Asian LNG markets. “Obviously LNG Canada, the partners in that project, have their own upstream resource,” Rockies LNG chief executive Charlotte Raggett said. “And so to be involved in an LNG project, to have access to those new markets, potentially with premium pricing, the producers had to essentially develop their own project and obviously find their own partners who could help us with that vision.” Enter the joint partnership behind Ksi Lisims LNG. Officially formed in May 2020, its beginnings can be traced years earlier to efforts by gas producers and the Nisga’a who were looking for partners and a real equity stake in an LNG project. Ksi Lisims LNG has withstood major regulatory changes in B.C. and a number of court challenges, said Heather Exner-Pirot, senior fellow and director of energy, natural resources and environment at the Macdonald-Laurier Institute. “They hung in at a time where Canadian LNG projects were dropping like flies,” Exner-Pirot said. “I think it’s a very significant project; one (reason) is the Nisga’a ownership, (and two) it’s producer-led — it’s these guys that own the resource and know that they could get so much more money if they could just liquefy it and export it across the Pacific Ocean.” A key motivator for Canadian producers are the perennially low gas prices in Western Canada. Even when neighbouring markets are hot, market watchers say, producers in Alberta and B.C. frequently endure depressed prices amid regional supply gluts exacerbated by a shortage of export options. Some of Canada’s largest natural gas producers, including Tourmaline Oil Corp. , are aggressively pursuing access to better prices by striking deals with U.S. LNG giants like Cheniere Energy Inc., or are exploring contracts for power plants to fuel the growth in data centres and A.I. But the possibility of LNG exports from Canada’s West Coast has remained a key ambition for a sector perennially awash in supply with too few readily available buyers. Canadian natural gas producers have had to take matters into their own hands before, said Advantage Energy Ltd. chief executive Mike Belenkie, who pointed to the producers who pushed for the construction of the Alliance Pipeline between Western Canada and Chicago, Illinois, in the mid-1990s. He said it was similar to the push the Canadian companies behind Rockies LNG are making now. “We have all this resource; it’s trapped in Alberta and B.C,” Belenkie said. “We know we can grow more profitably, but it can’t be done profitably unless there’s an export path. “So the early founders of the Rockies group recognized that no one else was going to help us. These guys recognized this early, seven, eight years ago, and said, ‘No one is going to do this for us. It’s gonna fall to us to take care of increasing our ability to export our product’.” However, despite Ksi Lisims having its key environmental approvals, Archer said, there remains some skepticism the project can proceed without a major pipeline company attached to it. The Nisga’a Nation and Western LNG are building a 750-kilometre pipeline that will supply the project’s floating LNG terminal on Pearse Island, north of Prince Rupert. But Archer said the project will likely require more experience and expertise, the kind largely only available from big midstream firms like Enbridge Inc. , TC Energy Corp. or Pembina Pipeline Corp. But both Enbridge and TC Energy continue to express reluctance to pursue another long-haul pipeline project in Canada, with TC Energy chief executive Francois Poirier reiterating in a recent interview with Bloomberg News that the company continues to see better returns on projects in the U.S. than in Canada. “I expect that the U.S. will continue to be where we’ll invest,” Poirier said. “This is where the project really faces its greatest uphill battle, is trying to get a pipeline built,” Archer said. “I can’t see how they’re going to be able to do this in sort of a timely and economic way without bringing on somebody… It’s immensely technically challenging.” • Email: mpotkins@postmedia.com What is Ksi Lisims LNG in northern B.C. — and which Canadian gas giants are behind it?Canada OKs West Coast LNG export project in first major approval for Carney governmentLNG Canada plant wins place on Carney's list of favoured projects