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Canada's Enbridge to invest $1.5 billion in Pacific Energy's Woodfibre LNG project

·2 min read
FILE PHOTO: The Enbridge Centre company office is seen in Edmonton

By Nia Williams and Arunima Kumar

(Reuters) - Canada's Enbridge Inc said on Friday it will invest $1.5 billion in the joint construction and operation of the Woodfibre liquefied natural gas (LNG) project with Pacific Energy Corp Ltd.

The move is Calgary-based Enbridge's first investment in a liquefaction facility. It comes amid a boom in North American LNG exports and high demand for the fuel as Europe seeks to replace lost Russian gas supplies following Russia's invasion of Ukraine.

Woodfibre LNG, a subsidiary of Pacific Energy Ltd, gave notice to proceed with construction to its prime contractor in April. The 2.1 million tonne per year export facility in Squamish, British Columbia, will have 250,000 cubic meters of floating storage capacity and is expected to be completed in 2027.

Under the partnership, Enbridge will invest in a 30% ownership stake in the $5.1 billion project, with Pacific Energy retaining the remaining stake in the facility.

Woodfibre is smaller and lower-cost than many other LNG projects being developed in North America, making it an attractive investment for Enbridge as the company builds experience in the sector, Jason Kearns, Enbridge's director of business development, said in an interview.

"This one's very close to existing assets in a jurisdiction that we're very familiar with, and at a scale that makes sense for us as a first foray into this space," Kearns said.

The project is underpinned by two long-term offtake agreements with BP Gas Marketing Ltd for 15 years representing 70% of the capacity, with additional commitments in development for up to 90%, Enbridge and Pacific Energy said in a statement.

The LNG industry is growing much more slowly in Canada than in the United States. Woodfibre is the second project to proceed, after the Shell-led LNG Canada project in northern British Columbia, scheduled to start operating in 2025.

Enbridge also announced a further $2.1 billion in new projects, including expansions of its British Columbia and Texas gas pipeline systems.

The company reported earnings attributable to common shareholders of C$450 million, or 22 Canadian cents per share, in the second quarter ended June 30, versus C$1.39 billion, or 69 Canadian cents per share, a year earlier.

Earnings were hit by non-cash, net unrealized derivative losses of C$850 million.

On an adjusted basis, the company posted a profit of 67 Canadian cents per share, below analysts' estimate of 71 cents per share, according to Refinitiv data.

Enbridge shares were last up 0.3% at C$57.61 on the Toronto Stock Exchange.

($1 = $1.2828)

(Reporting by Arunima Kumar in Bengaluru; Editing by Shailesh Kuber, Will Dunham and David Holmes)