Canada’s $4B LNG project and Samsung Heavy Industries hit with patent infringement lawsuit

Vancouver-based developer of the liquefied natural gas (LNG) Steelhead LNG has filed a patent infringement lawsuit with the Seoul Central District Court in South Korea against the developer of the Cedar LNG project on Canada’s West Coast and Samsung Heavy Industries (SHI), which is constructing a new floating LNG (FLNG) unit for the project.

Steelhead LNG, which describes the lawsuit as an important step in protecting its proprietary technology and intellectual property, is accusing Cedar LNG and Samsung Heavy Industries of infringing its Korean patents and seeks a halt to the construction of FLNG facilities, damages for the alleged unauthorized use of its patents, and an injunction prohibiting further infringement.

The FLNG facility for the Cedar LNG project, a partnership between the Haisla Nation and Canada’s energy infrastructure player Pembina Pipeline Corporation, in Kitimat, Canada’s British Columbia, is being designed and constructed by Samsung Heavy Industries and Black & Veatch, which act as the engineering, procurement, and construction contractors. 

Following the final investment decision (FID), which was expected by mid-2024 and made at the end of June, the construction activities kicked off earlier this year at the FLNG project, said to be the world’s first indigenous majority-owned such unit designed to run on hydropower, to start the process required to become a reality.

Several design decisions were made to curb the Cedar LNG project’s environmental footprint, such as the one to power the facility with renewable electricity from BC Hydro, with the site location allowing it to leverage existing LNG infrastructure, including the Coastal GasLink pipeline, a deepwater port, roads, and other infrastructure.

The long-term transportation agreement with Coastal GasLink Pipeline Limited Partnership enables the Cedar LNG facility to receive 400 million cubic feet per day of Canadian natural gas via the Coastal GasLink pipeline. The project secured 20-year take-or-pay liquefaction tolling services agreements with ARC Resources and Pembina for 1.5 mtpa each.

Victor Ojeda, President of Steelhead LNG, commented: “Steelhead LNG has invested significant resources in developing its unique LNG export facility solution. Our intellectual property is the cornerstone of this effort and we have a responsibility to protect it from unauthorized use. Our efforts to resolve the dispute with Cedar LNG have been repeatedly rebuffed, and unfortunately we have been forced to take legal action.”

According to Steelhead LNG, its patents cover aspects that are key features of its “unique solution; a leading, cost-effective way to liquefy natural gas for export to demand markets” by integrating tools and concepts such as electrically driven compressors, air cooling modules, and integrated storage.

As a result, the Vancouver-based LNG developer, which holds patents for LNG export facility solutions in Canada, the United States, South Korea, Australia, and Mexico, claims that its patented solution enables “unparalleled carbon reductions and avoids the harmful environmental impact of cooling water systems in such facilities.”

Steelhead LNG is adamant that its decision to take legal action demonstrates its commitment to protecting its technological advances and determination to ensure fair competition is maintained within the industry. The Cedar LNG project and its FLNG, expected to be delivered in the first quarter of 2028, are perceived to be strategically positioned to enable a lower-carbon energy option for global markets.

This project is anticipated to be funded with asset-level debt financing for around 60% of its cost, with the remaining 40% expected to be financed through equity contributions from both partners. Cedar LNG, slated to be in service in late 2028, is expected to create up to 500 jobs during peak construction and approximately 100 full-time jobs during operation.

With a total estimated cost of around $4 billion, the LNG project’s partners claim that Cedar LNG’s West Coast location provides one of the shortest shipping routes to key Asian markets, with the Douglas Channel, leading to and from the site, offering an established, reliable shipping route and deepwater marine inlet, with year-round ice-free conditions.

Whether Steelhead LNG will be successful in its attempt to halt the Cedar LNG project remains to be seen. The firm pulled the plug on its Kwispaa LNG project on Vancouver Island in 2019, after the Canadian Environmental Assessment Agency began a federal environmental assessment, following the National Energy Board’s green light for the 25-year export of up to 24 million tons of LNG.