Welcome to Economic Insights, your twice-weekly deep dive into the major projects and policy shifts shaping the Canadian economy.

Stories we are following:

• The proposed Ksi Lisims LNG project in British Columbia has secured its third major long-term supply deal, marking the first time a European buyer has officially committed to Canadian LNG, according to the feds.
• The agreement with Germany’s state-owned energy firm SEFE will see the global utility giant purchase one million tonnes of liquified natural gas annually for up to 20 years. An industry source tells iPolitics most of that fuel will be traded via global swaps rather than shipped to European markets.
  

Most German-bought Ksi Lisims LNG bound for global swaps, not Europe (iPolitics)

The new deal brings a significant boost to Ksi Lisims, a $10-billion floating LNG terminal proposed near the Nisga’a Nation community of Gingolx. Backed by the Nisga’a First Nation, Houston-based Western LNG, and Rockies LNG, the project has now locked in 5 million tonnes of its targeted 12-million-tonne annual capacity, following previous 20-year agreements with Shell and TotalEnergies.

• The swap strategy: The agreement is structured on a “Free-on-Board” (FOB) basis, meaning SEFE takes ownership at the B.C. terminal and manages its own logistics. Because Pacific basin markets like Asia are geographically closer and are easier to ship to, SEFE is expected to leverage global swaps. It could trade its Canadian cargo to Asian buyers in exchange for Atlantic-sourced LNG to feed northwest European terminals.
• The Panama bottleneck: Shipping B.C. gas directly to Europe presents a logistical headache. While Federal Energy Minister TIM HODGSON noted that smaller ships could potentially route through the Panama Canal, the maritime shortcut is increasingly costly and plagued by drought-driven congestion. Alternative routes like sailing entirely around South America or Africa adds considerable travel time and expense.
  
• A bit of both: With the LNG bought from Ksi Lisims, SEFE is expected to do mostly swaps, although some cargo could land directly in Europe, according to an industry source.
  
• Inching closer to commitment: Partners behind Ksi Lisims are preparing to make a final investment decision (FID) in the coming months. While securing about 40 per cent of its capacity is a major milestone, it remains to be seen if it will satisfy investors; rival mega-projects, such as Alaska’s $45-billion Glenfarne LNG facility, said it would wait to secure 80 per cent of its capacity under contract before greenlighting construction.
  
• Domestic hurdles: Even with federal momentum (the Carney government referred Ksi Lisims to the Major Projects Office for potential fast-tracking under the Building Canada Act last fall) potential challenges remain. The Lax Kw’alaams Band and the Metlakatla First Nation have filed judicial review applications challenging the provincial environmental certificate issued last September.
  
• Public funding: iPolitics asked Hodgson’s office if the Canada Infrastructure Bank is still considering financing Ksi Lisims given that the private sector seems willing to help de-risk the project. “I don’t think we would speculate on what or whether the CIB might fund,” responded a spokesperson. The Globe recently reported the CIB had retained former Woodfibre LNG president David Keane as a consultant as it mulls financing for Ksi Lisims.
  

By the numbers:

1 million: The number of tonnes of LNG Germany’s SEFE will purchase annually from the Ksi Lisims project under the new 20-year agreement.

$10 billion: The estimated construction cost of the proposed Ksi Lisims floating LNG terminal near Prince Rupert, alongside an estimated $12-billion gas transmission pipeline.

5 million: The total annual capacity (out of 12 million tonnes) now officially spoken for by Ksi Lisims’ three primary offtake buyers: Shell, TotalEnergies, and SEFE.

Major projects watch:

– iPolitics asked Conservative leader PIERRE POILIEVRE if he intends to help the Carney government pass its upcoming legislation changing rules for project reviews. “What Bill?” he answered. “He’s been in office for 14 months promising to fast track approvals, and what we have is a discussion paper. As Elvis Presley said: a little less conversation, a little more action please.” We’ll take that as a yes?

– Per CBC: Nova Scotia Premier TIM HOUSTON says his government is about to start negotiating with one company interested in exploratory onshore drilling for natural gas, and he’s hopeful a second call for proposals that just launched will land further proponents.

– U.S.-based Northern Oil and Gas (NOG) is making its first strategic entry into Canada, securing a 25 per cent non-operated stake in light oil properties within Alberta’s asset-rich Duvernay East Shale Basin for a $350 million. The assets are currently operated by Parallax Energy Operating Inc. and span 75,000 net acres. They boast roughly 20 years of drilling inventory with breakeven costs sitting below $50 WTI.

– Per the Financial Post: General Fusion Inc. says it is considering a listing on the Toronto Stock Exchange to secure more Canadian investment as the global race to commercialize nuclear fusion energy heats up. The Vancouver-based company, which is developing magnetized target fusion technology, is set to debut on the Nasdaq as soon as June by merging with Spring Valley Acquisition Corp., a special purpose acquisition company.

– From the latest Zacks Investment Research: “Powerful long-term structural drivers are reinforcing the sustained momentum toward clean and renewable energy, making the transition increasingly driven by energy security and rising power demand rather than solely by environmental considerations…Investor interest in the space has continued to strengthen, as reflected in the performance of the S&P Global Clean Energy Transition Index, which has gained 30.39% year to date and 18.81% in the current quarter so far.” 

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