An Alberta company has signed an agreement with the Prince Rupert Port Authority to put a $200-million liquefied natural gas (LNG) terminal near the northern B.C. coastal town.

"We've come to an agreement on a 30-year lease and three 10-year extensions," said Wayne Stanley, vice-president of Westpac Terminals Inc. of Calgary, which will build and operate the facility.

If all goes according to plan, said Stanley, the terminal will help distribute energy to residents across B.C. and help the province cope with increasing demand for natural gas over the next two decades. Westpac plans to build a new dock and a 160,000- to 180,000-cubic-metre storage tank and move 300 million cu. ft. of LNG per day.

LNG is considered the wave of the future due to a number of factors, including declining gas reserves in the Western Canada Sedimentary Basin, high gas prices and relatively low production costs, and political instability in the Middle East and other war-torn regions of the world.

Don Krusel, the Prince Rupert Port Authority's president and CEO, said the deal will help offset declines in container traffic in the forestry and mining sectors in recent years.

"We feel very good about this agreement because LNG facilities have been looked at and talked about for this particular port for decades now," said Krusel. "So it's good to see us progressing in that direction again."

In the 1980s, the port's Fairview terminal handled approximately one million tonnes of forest products per year. Today, the total is around 100,000 tonnes per year, said Krusel.

As a result of a mine shutdown in Tumbler Ridge, the port has watched coal shipments fall to zero from six million tonnes. However, the growing Chinese market is expected to boost coal shipments in the near future.

"It helps add business and traffic to the port generally," said Krusel. "It helps job creation and the community. But also, because you have a growing abundance of natural gas in commercial quantities at a commercial rate, it opens up the opportunities to develop different industrial sectors for the port and the community."

Environmental and regulatory approval applications will start in January and construction will start within 18 to 24 months. Stanley said he does not foresee environmental approval problems because the facility, located on Ridley Island, a short ferry ride from Prince Rupert, will lie near existing grain and coal terminals that have already disturbed the land.

The LNG facility is expected to begin operations in 2009. Stanley said Prince Rupert is an ideal location because of its large port, deep water that can accommodate large ocean-going vessels, access to trucks, trains and pipelines - and the positive attitude the community has demonstrated.

Local residents, business operators and politicians view oil and gas development as a means of rejuvenating the area in wake of declines in the traditional industries of fishing, forestry and grain-handling in recent years.

"We've designed our project so that we don't need new pipelines," said Stanley. "The LNG will be moved on existing pipelines and not have that environmental impact."

Westpac plans to have long-term contracts in place with shippers before construction starts and use those deals to secure capital funding. Stanley said he does not know where the LNG will arrive from, but large LNG supplies have been produced in the Middle East, Indonesia, Australia and Russia - among other countries.

The LNG terminal will be an import facility. Some of the gas may be used to power homes and businesses in Prince Rupert, a small market of 13,000 people, but most of the LNG will go to other markets.

Stanley said the Prince Rupert terminal could be an alternative to a Terasen Gas LNG storage facility to be built near Ladysmith on Vancouver Island. Terasen's facility is designed to serve Island customers during peak demand periods in cold winter months.

Another company, Galveston LNG Inc., is proposing to build a larger $500-million facility in the nearby village of Kitimat. But Stanley said there is enough room for two LNG terminals on the north coast, because the two companies would serve different customers and demand for LNG is expected to reach 10 to 15 billion cu. ft. per day across North America.

Westpac announced its plans to develop the LNG terminal in July after signing an agreement with federally owned and Prince Rupert-based Ridley Terminals Inc., on land that Ridley leased from the port authority. The deal was subject to Westpac signing its own lease with the port authority.

(Monte Stewart can be reached at monte@businessedge.ca)