Bermuda-based Golar LNG has confirmed that it has signed a finalized contract for both feed gas supply and LNG purchase and off-take for train #1 of the Douglas Channel LNG Project, the smallest of the three (so far) proposed LNG projects in Kitimat.
The contract award for LNG purchase and off-take was made jointly to Golar and LNG Partners, LLC (Houston, TX) (“LNG Partners”) and the contract award for feed gas supply was made to LNG Partners.
The DC Project is being jointly developed by the Haisla Nation and Douglas Channel Gas Services Ltd and is expected to produce approximately 700,000 metric tonnes per annum of liquefied natural gas from the initial planned production facility beginning in the second quarter of 2015.
Golar’s participation in the project and its commitment to the LNG off-take remains subject to the Company reaching agreement with the current proponents of the DC Project for financing of the facilities, and receipt of all permits required for the project to proceed on a firm basis.
Golar LNG describes itself on its website as “one of the world’s largest independent owners and operators of LNG carriers.”
At the meeting of District of Kitimat Council on Jan. 21, 2013, Mayor Joanne Mongahan said that the BC LNG – Golar deal would mean enough business to fill about one LNG tanker each month. That volume of gas can be transported over the existing Pacific Northern Gas pipeline, Monaghan said.
Enbridge filed a revised map of Kitimat harbour with the revised route for the Northern Gateway Pipeline and terminal in December 2012.
Enbridge Northern Gateway wants a much larger tank farm at its proposed Kitimat terminal, the company says in documents filed with the Joint Review Panel on December 28, 2012.
On that date, Enbridge filed its fifth revision of the Northern Gateway pipeline route and plans with the JRP. While for Enbridge engineers the filing may be a routine update, as surveys and planning continue, Smithers based enviromentalist Josette Weir has filed an objection with the JRP challenging the revised plans because, she says, the JRP has closed off any opportunity for intenvenors to make their own updates, calling into question once again the fairness of the JRP process.
From the documents filed with the JRP, it appears that Enbridge wants not only to expand the tank farm and adjacent areas but also to have a potentially much larger area on the shores of Douglas Channel for even more expansion in the future.
At the Kitimat terminal, Enbridge says there will now be 16 oil tanks, up from the original 11. The company also says: “The terminal site will also have some limited additional civil site development to allow for potential future site utilization.” While Enbridge proposes to keep the number of condensate tanks at three, their capacity would be increased.
In addition, Enbridge wants an enlarged “remote impoundment reservoir” to comply with the BC Fire Code, so that it would be:
• 100% of the volume of the largest tank in the tank farm, plus
• 10% of the aggregate volume of the 18 remaining tanks, plus
• an allowance for potential future tanks, plus
• 100% of the runoff from the catchment area for a 1 in 100 year, 24 hour storm event, plus
• the amount of fire water generated from potential firefighting activities at the tank farm.
Enbridge goes on to note:
An update to 16 oil tanks at the Kitimat Terminal is not expected to alter overall visibility of the marine terminal and therefore impact visual or aesthetic resources.
In her news release, Josette Wier, who describes herself as “an independent not funded intervenor in the hearing process,” says she filed a notice of motion on January 17, 2013, noting “there are numerous embedded proposed changes which have nothing to do with the route revision,” including the fact that “the tank farm in Kitimat is considerably increased from 11 to 16 tanks for the oil tanks with an almost doubled working capacity, while the condensate tanks capacity is increased by 29 per cent.”
“What does this have to do with a route revision?” she asks in the news release.
In the news release, Wier says: “that this is an abuse of process when engineering and design question period ended in Prince George last November. Not withstanding the underhanded way of presenting new evidence, re-questioning on those issues doubles the amount of work and expenses for intervenors.
“Abuse of process”
She asked the Joint Review Panel to order Northern Gateway to re-submit their proposed changes indicating clearly the ones unrelated to the route changes and describing them along with their rationale.
Wier goes on to say: “It is everyone’s guess why there is a doubling of the tank farm capacity, but certainly points out to the larger pipeline shipping volumes the company had indicated would be a possible Phase II of the project.” She says: “It looks like Northern Gateway is quietly moving into the 850,000 barrels a day proposal, twice the volume the application has been cross-examined about. It is clearly an abuse of process.”
In her actual notice of motion, Wier goes further by taking aim at the JRP itself by saying that “the Applicant [Enbridge] can make changes to the Application whenever they want. We have already seen in their July submissions inclusion of new evidence which conveniently escaped information requests. The added work and cost imposed on intervenors and the Panel seem irrelevant to the Applicant.” She complains that her requests for more information in an earlier notice of motion “was dismissed by the Panel on the grounds that my request ‘would require an unreasonable amount of effort (both by Northern Gateway and other parties reviewing the material’ …. If this argument applied to my Notice of Motion, I suggest it should apply to embedded changes buried in the Applicant’s filings of December 28, 2012.”
Rerouting at Burns Lake
A number of the other changes appear to show continued strained relations between Enbridge and First Nations, for example it says:
There is a possibility of relocating the pipeline route… further north of the Burns
Lake area to avoid proposed Indian Reserve lands that would overlap the pipeline route,.. This revision will be evaluated when further information on the proposed Indian Reserve lands is available and when further consultation with the relevant Aboriginal groups has taken place.
On the other hand the revisions also show that the pipeline will be now routed through an existing right of way through the Alexander First Nation, near Morinville, Alberta, as part of an agreement with the Alexander First Nation.
Another route change is near the Morice River, where Enbridge says
The Morice River Area alternate will generally have less effect on wildlife riparian habitat since it is located away from the Morice River and floodplain. This revision is also farther from the proposed Wildlife Habitat Area for the Telkwa caribou herd and no longer intersects any primary and secondary goat ungulate winter range polygons. However, this revision no longer parallels the Morice West Forestry Service Road (FSR) and Crystal Creek FSR and offers fewer opportunities to use existing rights-of-way. This may increase linkages between cutblock road networks and increase human access locally but does not preclude Northen Gateway from applying other methods to minimize linear feature density in this region.
Wier also complains that the Enbridge did not properly file its latest documents, asking the panel to rule that it order Northern Gateway to re-submit their last revisions submitted in December
using proper JRP evidence numbering system and “Adobe pages numbers.” The huge number of documents in the JRP system is confusing and improper filing makes it harder for intervenors and others to sort their way through new information.
A revised map of the Kitimat harbour as filed by Enbridge with the JRP in December 2012.Revised route map for the Northern Gateway pipeline as filed with Enbridge with the JRP on Dec. 28, 2012.
With temperatures climbing from climate change, the mountain pine beetle is now moving to higher elevations on mountain slopes, and is a “rising threat” to the whitebark pine, according to a University of Wisconsin-Madison study published today, Dec. 31, 2012, in the Proceedings of the National Academy of Sciences.
Map showing the range of the Whitebark pine. (Wikipedia)
The whitebark pine is found mainly in the Rocky Mountains and Coast Range of British Columbia and into the northern United States.
In the US, there there have been a number of studies of pine beetle infestation of the whitebark pine. In 2011, the Seattle Timesreported
A study in the mid-2000s showed whitebark trees had declined by 41 percent in the Western Cascades. Tree declines throughout Washington and Oregon hovered around 35 percent. In the coastal range and the Olympics, blister rust infection ranged from 4 to 49 percent. Nearly 80 per cent of the whitebark in Mount Rainier National Park are infected. Whitebark deaths in North Cascades National Park doubled in the last five years.
The Seattle Times also quoted the U.S. Fish and Wildlife Service reporting in 2007 that beetles killed whitebark pine trees across half a million acres in the US West — the most, at the time, since record-keeping began. Two years later, beetles killed trees on 800,000 acres.
Ken Raffa, a University of Wisconsin -Madison professor of entomology and a senior author of the new report says.”Warming temperatures have allowed tree-killing beetles to thrive in areas that were historically too cold for them most years. The tree species at these high elevations never evolved strong defenses.”
A warming world has not only made it easier for the mountain pine beetle to invade new and defenseless ecosystems, the scientists say, but also to better withstand winter weather that is milder and erupt in large outbreaks capable of killing entire stands of trees, no matter their composition.
“A subject of much concern in the scientific community is the potential for cascading effects of whitebark pine loss on mountain ecosystems,” says Phil Townsend, a Univeristy of Wisconsin-Madison professor of forest ecology and a senior author of the study.
The mountain pine beetle’s historic host is the lodgepole pine, and it was widespread lower elevations until the pine beetle infestation began to spread in the late 1990s. The pine beetle which are about the size of a grain of rice, played a key role in regulating the health of a forest by attacking old or weakened trees and fostering the development of a younger forest after the older trees died or were destroyed by fire.
However, recent years have been characterized by unusually hot and dry summers and mild winters, which have allowed insect populations to boom. This has led to an infestation of mountain pine beetle described by the scientists as “possibly the most significant insect blight ever seen in North America.”
Over most of the Interior, extreme winter weather (colder than minus 35 Celsius for at least several days or even weeks) historically killed most of the pine beetle population, limiting the duration of, and damage from, periodic epidemics. Such a wide-spread weather event has not occurred in the B.C. Interior since the winter of 1995/96.
The lodgepole pine co-evolved with the bark beetle, ad so it evolved chemical countermeasures, volatile compounds toxic to the beetle and other agents that disrupt the pine bark beetle’s chemical communication system.
According to the Wisconsin study, despite that robust chemical defense system, the lodgepole pine is still the preferred menu item for the mountain pine beetle, suggesting that the beetle has not yet adjusted its host preference to whitebark pine. “Nevertheless, at elevations consisting of pure whitebark pine, the mountain pine beetle readily attacks it,” says Townsend.
The good news, he adds, is that in mixed stands, the beetle’s strongest attraction is to the lodgepole pine, suggesting that, at least in the short term, whitebark pine may persist in those environments.
However, the 2007 US study quoted by the Seattle Times also warned that unlike lodgepole, whitebark pines produce few seed cones and do so late in life, so they “aren’t set up to survive massive slaughter.”
The new study, conducted in the Greater Yellowstone Ecosystem, also showed that the insects that prey on or compete with the mountain pine beetle are staying in their preferred lodgepole pine habitat. That, says Townsend, is a concern because the tree-killing bark beetles “will encounter fewer of these enemies in fragile, high-elevation stands.”
Whitebark pine trees are an important food source for wildlife, including black and grizzly bears, and birds such as the Clark’s nutcracker named after the famed explorer and which is essential to whitebark pine forest ecology as the bird’s seed caches help regenerate the forests.
(According to Wikipedia Clark’s Nutcrackers each cache about 30,000 to 100,000 each year in small, widely scattered caches usually under 2 to 3 centimetres of soil or gravelly substrate. Nutcrackers retrieve these seed caches during times of food scarcity and to feed their young. Cache sites selected by nutcrackers are often favorable for germination of seeds and survival of seedlings. Those caches not retrieved by time snow melts contribute to forest regeneration. Consequently,Whitebark Pine often grows in clumps of several trees, originating from a single cache of 2–15 or more seeds. Douglas Squirrels cut down and store Whitebark Pine cones in their middens. Grizzly Bears and Black Bears often raid squirrel middens for Whitebark Pine seeds, an important pre-hibernation food. Squirrels, Northern Flickers, and Mountain Bluebirds often nest in Whitebark Pines, and elk and Blue Grouse use Whitebark Pine communities as summer habitat. )
The BC government report says the pine beetle epidemic has now killed an estimated 710 million cubic metres of commercially valuable pine timber, 53 per cent of all such pine in the province. The rate of damage has been slowing for several years, but is projected to grow to 58 per cent by 2017 (to 767 million cubic metres).
Both the provincial and federal governments have spent hundreds of millions of dollars on the mountain pine beetle epidemic, beetle killed pine forest is more vulnerable to forest fires, and it is possible that the drier wood from beetle killed wood is responsible for the explosions at mills in Burns Lake and Prince George.
Map showing pine beetle infestation in British Columbia (BC Forests)
The BC government report says
B.C. has been battling the mountain pine beetle epidemic since the year 2000. From 2001 through 2004, the focus was on limiting the spread of the infestation and harvesting infested and susceptible pine stands. Not content to wait for frosts and winter cold spells that normally control the beetle, the Province took other steps to control the beetle’s spread. However the infestation continued to spread dramatically to 2007.
Throughout last decade, government and industry concentrated on salvage harvesting, to recover maximum economic value, and the reforestation of the dead stands. The provincial and federal governments invested hundreds of millions of dollars in mitigating the infestation’s impacts, in developing new markets for beetle-killed lumber, and in creating economic strategies for the future.
At the same time, the forest industry invested in adapting its harvest and milling technologies to the ever-changing forest resource, using the knowledge and experience gained from a significant, but much smaller, beetle infestation that hit the Cariboo-Chilcotin in the mid-1980s.
These actions have placed the industry, government and communities in the best position to address the next phase of the epidemic, as harvest and milling activities inevitably start declining.
Apache has a new partner in the Kitimat LNG project, Chevron Canada Ltd and, in effect, Chevron is taking over the project from Apache who has been unable to find customers for the liquified natural gas project in Asia.
A news release from Apache announced “a broad agreement with Chevron Canada Limited to build and operate the Kitimat LNG project.”
Chevron Canada and Apache Canada each will become a 50 per cent owner of the Kitimat LNG plant, the Pacific Trail Pipeline and 644,000 gross undeveloped acres in the Horn River and Liard basins. Chevron Canada will operate the LNG plant, which will be located on the northern British Columbia coast, and the pipeline. Apache will continue to develop shale gas resources at the Liard and Horn River basins in north eastern BC.
Encana and EOG Resources — currently 30 percent non-operating partners in Kitimat LNG and Pacific Trail Pipeline — will sell their interests to Chevron and exit the venture. As part of the transaction with Chevron, Apache will increase its ownership of the plant and pipeline to 50 percent from 40 percent.
G. Steven Farris, Apache’s chairman and chief executive officer said in the company news release, “This agreement is a milestone for two principal reasons: Chevron is the premier LNG developer in the world today with longstanding relationships in key Asian markets, and the new structure will enable Apache to unlock the tremendous potential at Liard, one of the most prolific shale gas basins in North America.” “With experience developing LNG projects, marketing expertise and financial wherewithal, Chevron is the preferred coventurer to join Kitimat LNG,” Farris said. “Apache has a proven record in finding and developing shale gas resources in Canada and is the logical operator for the upstream elements of the joint venture.”
In its news release, Chevron quoted vice chairman George Kirkland as saying: “The Kitimat LNG development is an attractive opportunity that is aligned with existing strategies and will drive additional long-term production growth and shareholder returns.”
“This investment grows our global LNG portfolio and builds upon our LNG construction, operations and marketing capabilities. It is ideally situated to meet rapidly growing demand for reliable, secure, and cleaner-burning fuels in Asia, which are projected to approximately double from current levels by 2025.”
The two-train (stage) Kitimat LNG Project is still working through the Front-End Engineering and Design (FEED) phase. Construction has continued at the Bish Cove site throughout the summer but has slowed down to the uncertainty over the future of the project and some environmental problems.
Current plans call for two liquefaction trains, each with expected capacity of 5 million tons of LNG per annum (about 750 million cubic feet of gas per day). Kitimat has received all significant environmental approvals and a 20-year export license from the Canadian federal government.
The 290-mile (463-km) Pacific Trail Pipeline is planned to provide a direct connection between the Spectra Energy Transmission pipeline system and the Kitimat LNG terminal.
While the Apache release says: “The project has strong support from many of the First Nations along the route,” there is no support at this moment from the Wet’suwet’en, in the area from Burns Lake through Smithers to the mountains, because some houses are strongly opposed to the pipeline on their traditional territory.
In the Apache news release, Farris says: “”We want to thank and acknowledge EOG and Encana for their contribution to the development of the Kitimat project. We appreciate the hard work of many employees and contractors to advance the project to this stage and the strong support the plant and pipeline projects have received from local communities, provincial and federal officials and the Haisla and other First Nations.
“Construction of the plant and pipeline will have a significant economic impact, and the operational phase will provide opportunities for employment as well as royalties and tax revenues for the Federal, Provincial and local governments for many years,” he said. “Chevron and Apache will continue to develop this project in a safe and environmentally responsible manner.”
As the news releases point out Chevron is a major player in Australia’s LNG projects, considered by many to be Canada’s rival in finding market for natural gas in Asia. Chevron is the operator and led marketing efforts at Wheatstone, a two-train plant with capacity of 8.9 million tons of LNG a year that is expected to commence operations in 2016. Chevron also operates the Gorgon LNG project in Australia and LNG Angola.
Much of the media attention is also on the deal for the natural resources northeastern BC, with, Chevron Canada acquiring approximately 110,000 net acres in the established Horn River Basin from Encana, EOG and Apache, and approximately 212,000 net acres in the Liard Basin from Apache. Chevron Canada Limited and Apache will each hold a 50 percent interest and Apache will operate these two natural gas resource developments.
In its news release, Encana concentrates on the natural gas deal, quoting Randy Eresman, Encana’s President & CEO, “This investment by Chevron, a multinational LNG player, represents a key step in the development of LNG export from Western Canada. Our main goal since we first acquired an interest in Kitimat LNG almost two years ago was to help ensure the progression of this project towards its development. While we are no longer a direct participant in this project, we continue to support LNG export as vital to diversifying markets for North American natural gas.”
The company goes on to say that: “The sale of Encana’s interest in the proposed Kitimat LNG export facility is consistent with the company choosing to focus on its core business. In addition, this transaction reduces Encana’s future capital commitments. The proceeds from this transaction will help to strengthen the balance sheet and provide further financial flexibility to fund capital programs and develop key and emerging resource plays.”
The Financial Post points out that “the Chevron deal leaves most of the LNG projects in the hands of foreign companies, which have competing interests in LNG projects across the world.” That means that the Haisla Nation, with its partnership with the BC LNG project, is one of the few Canadian players left in the LNG scramble.
The District of Kitimat Council Monday, Dec. 17, 2012, endorsed a campaign by the Canadian Association of Petroleum Producers asking for tax breaks of Liquified Natural Gas liquefaction facilities in the 2013 federal budget.
A report to the Kitimat council said that on November 23, the mayors of Kitimat and Prince Rupert, sites for proposed LNG terminals, and the mayors of Dawson Creek, Fort St. John and Fort Nelson, where the shale gas deposits are found, held a video conference call with CAPP to discuss the new tax proposals.
CAPP is asking that the federal government to change the classification of LNG liquefaction facilities under tax law so that they are equivalent of manufacturing facilities. Currently LNG liquefaction are can claim depreciation at eight per cent, while manufacturing and processing facilities can claim depreciation at 30 per cent.
The report to Kitimat council from chief administrative officer, Ron Poole, said “This change will increase Canada’s competitiveness for global market access and support significant economic growth.”
A report written by the Canadian Association of Petroleum Producers attached for council argues that by turning natural gas into its cold, liquefaction form, it is actually being manufactured. CAPP quotes tax law as saying:
manufacture of goods normally involves creation of something…processing of goods usually refers to a technique of preparation, handling or other activity designed to effect a physical or change in an article or substance.
CAPP goes on to argue:
The chemical composition of the natural gas is changed through treatment process and physical change occurs through the liquefaction process. The treatment processes include removing impurities such as acid gases and mercury, as well as dehydration and the removal of heavier hydrocarbons in order to facilitate the manufacturing process and to meet end market specifications.
CAPP goes on to argue that the current taxation levels put Canadian LNG facilities at a competitive disadvantage with potential competitors in the United States and Australia. It says that under the current tax treatment in Canada, an LNG liquefaction facility would take 27 years to depreciate. In the United States and Australia, LNG facilities are depreciated over 10 years. Changing to the Canadian manufacturing level would depreciate over seven years.
CAPP notes that there are currently six liquefaction plants under consideration by their respective corporate boards. It says that the tax change could hasten a positive decision by those companies, ensuring the projects go ahead because “Canada is a natural fit with its open-for-business attitude, stable political environment and commitment to responsible development.”
Skeena Bulkley Valley MP and NDP House leader says the Harper government’s approval of the takeover by CNOOC, the China National Offshore Oil Corporation of the Alberta-based energy company, Nexen Inc. makes “absolutely no sense.” Cullen also told northwest reporters in an end-of-year news conference that if the Conservatives continue their present policies, “Beijing will be directing Canadian energy policy and what we do with natural resources.”
Cullen said the approval of the CNOOC Nexen deal was a major development: “The other big news was the reluctant, but enthusiastic approval of the CNOOC Nexen deal; this is the purchase of by the Chinese state-owned company CNOOC. Nexen [is] the 12th largest group in the oil sands, which is also meant to be the source for the Northern Gateway pipeline.
“Stop if anyone thinks this is a coordinated conspiracy to turn the oil sands into an entirely Chinese government owned project.
“[It is] very, very unpopular in Canada, very unpopular in Alberta and the government did this very strange thing where they approved the deal and then said never again because the net benefit test is not being met and that it’s bad for Canada but this deal can go ahead.
“It makes absolutey no sense whatsoever. This combined with the agreement with China, the Foreign Investment Protection Agreement, it now allows the Chinese government to buy up as many oil sands leases as they want. This will very much put a chill on any government in Canada, provincial or federal from introducing laws that hurt Chinese interests because we are now open to lawsuits.”
Cullen was also asked about the PetroChina’s purchase of a stake in the Browse LNG project in Australia. (Cullen’s news conference took place before the announcement that PetroChina had bought into an Encana project as well) and the prospect for LNG projects at Kitimat and Prince Rupert.
“I don’t think the market has the capacity for all of these projects to go ahead and that’s coming from people who know a lot more about LNG shipping than I do.
“I don’t think we have the carrying capacity in the northwest for all of them to go ahead. It will be the first two or three through the gate that will be successful and I think there’s some concern from folks when they look at the whole sweep of projects being proposed what the total shipping traffic would be and what the impact would be just in general. I can see people’s hesitation.
“We’ve been trying to work with those companies so they are out and meeting with the communities. Like any industry there are some companies that are quite open and good at consulting and actually accommodating peoples’ concerns. There are others are not so good. So we’ve been trying to encourage everyone to get to the gold standard and know that they need a social licence to operate in the northwest and if they don’t ahve it, it’s very difficult for the project to get off the ground.
Wild, wild west
“When we don’t have good laws in Canada talking about saying what foreign state control over our natural resources can and can’t be, it’s the wild, wild west. So as this thing goes along, the concerns will become more and more clear that the interests being served will not be Canadian.
“To give the Chinese credit, they’re absolutely up front and explicit about this. To the Conservative government’s complete shame, they don’t seem to care. Beijing will be directing Canadian energy policy and what we do with natural resources.
“All of this to win the government a little bit of favour with the Chinese is just maddening to me.
“Again I recall the old line the Conservatives used to use in elections ‘we’re going to stand up for Canada.’ Wow, did that ever turnout to be an outright lie.
So it’s frustrating and its very worrisome. This isn’t a right-left thing, I’m hearing from a lot of conservative commentators and folks back in the northwest who are very strong supporters of Conservative politics that this not their kind of conservative government, they don’t even recognize it any more.
“This happens to prime ministers from time to time. They get sucked in to the lobbyists and the global circuit and really start to lose touch with what Canadian values are. I think, unfortunately that’s what happened to our prime minister.
PetroChina went on a multi-billion dollar natural gas buying spree Thursday, Dec. 13, 2012, picking up shares in operations in both Canada and Australia.
In Canada, Encana, one of the partners in the Kitimat LNG project, signed a joint venture arrangement with Phoenix Duvernay Gas, a wholly owned subsidiary of PetroChina, to explore and develop Encana’s extensive undeveloped Duvernay naturgal gas holdings in west-central Alberta. According to an Encana news release, Phoenix will gain a non-controlling 49.9 per cent interest in Encana’s approximately 445,000 acres in the Duvernay play for total consideration of C$2.18 billion.
Hours earlier, PetroChina agreed to pay $1.63 billion for BHP Billiton’s 10 per cent share for an Australian LNG development, known as Browse, that like the KM LNG project in Kitimat had been delayed by the uncertainty in the LNG market. The other partners in the Browse are Woodside Petroleum, Chevron Corporation, Royal Dutch Shell and BP.
Encana says the PetroChina/Phoenix investment is significant for the Duvernay, which Encana describes as a “liquids rich play” with potential for natural gas, butane and oi development.
THE Encana release quotes Randy Eresman, Encana President & CEO. “A transaction of this magnitude keeps us on track to create a more diversified commodity portfolio and maintain our balance sheet strength. It is a strong endorsement of Encana’s position as a reliable long term partner.”
The release also quotes Zhiming Li, Phoenix’s President & Chief Executive Officer, as saying The Duvernay project will combine Phoenix’s integrated upstream and downstream capabilities and financial resources with Encana’s proven resource play hub expertise. This joint venture will build a foundation for the successful development of the Duvernay play and help to diversify our business portfolio. Encana is our ideal long term partner for the development of our future natural gas business.”
The company goes on to say:
Having entered into several joint venture transactions in 2012, these types of arrangements have become an important part of Encana’s business model. Joint ventures help the Company to achieve a highly efficient deployment of capital throughout its vast exploration and development asset base as Encana transitions to a more diversified portfolio of commodities.
Significantly, the Encana release, while talking about LNG development and export, it makes no mention of the Kitimat KM LNG project, instead looking south to Louisiana.
These relationships have the potential to increase natural gas demand as a number of Encana’s partners are actively exploring opportunities to export liquefied natural gas (LNG), while some are industrial consumers looking to transition to natural gas as fuel for their operations. An example is a recent agreement with Nucor Energy Holdings (Nucor) which is designed to support Nucor’s increased use of natural gas for its facilities, such as its direct reduced iron facility currently under construction in Convent, Louisiana.
Reports say PetroChina paid a premium price for the Australian Browse natural gas project, anticipating that if it comes on stream, as planned in 2018, the current glut in the natural gas market will have eased and once again LNG will be a seller’s market.
The Browse project at James Price Point on the north-western coast of Australia is facing similar opposition to projects in British Columbia, including some of the site’s aboriginal landowners and from some environmental groups.
The opposition to the Australian Browse project, according to reports, reflects a split in the local aboriginal community. While Wikipedia says that 60 per cent of the local aboriginal people voted in favour of the project, there is also fierce opposition, according to the Australian Mining Journal, which reported in 2009:
[A] number of Traditional Owners, as part of the Save The Kimberley organisation, issued a statement which said there is not unanimous support for this site.
In a signed declaration, Traditional Owners have affirmed that they do not support the imposition of an industrial site on their country and will legally challenge the authenticity of any agreements entered into by the Kimberley Land Council supporting the proposal.
The statement said that “…many local Indigenous people are disgusted by the apparent abandonment of the established process put in place by the previous State government. Concerns include the threats made earlier in the year by the Premier regarding compulsory acquisition of land and the pre-empting of the Joint State and Commonwealth environmental and cultural assessment process via announcements by Woodside and the Premier.”
A company called Woodside Petroleum, which leads the LNG venture wants to build the “greenfield” onshore terminal but is facing competition from Shell’s proposed offshore floating LNG “given the land access challenges and soaring development costs in Australia,” even though Shell also has a stake in the Browse project.
Ellis Ross, Chief Counsellor of the Haisla Nation tonight denied reports published in the Globe and Mail that the Haisla are softening their stand against the Enbridge Northern Gateway pipeline project.
Ross confirmed that the Haisla have withdrawn from its membership in Coastal First Nations, largely due to disagreements on liquified natural gas projects. The Haisla are a partner in the BC LNG project and have an agreement supporting the KM LNG project at Bish Cove which is in Haisla traditional territory.
The Haisla First Nation, an aboriginal group situated at the terminus on the B.C. coast of the proposed Northern Gateway pipeline, has pulled out of an organization that has stridently opposed the controversial project, and called for greener practices in the export of natural gas.
The Haisla said they have withdrawn from Coastal First Nations, effective immediately, amid a first nations debate about the environmental impact of West Coast industrial development that has now blown out into the open. The move also comes amid a softening Haisla stance toward oil exports from their traditional territory, which some see as evidence that the tide is turning on opposition to Gateway.
Ross strenuously denied that there has been any change in the Haisla opposition to the Northern Gateway project as the Globe and Mail is reporting. He says the disagreements with Coastal First Nations comes from the fact that the LNG project terminals are in Haisla traditional territory.
Another member of the Coastal First Nations, the Gitga’at First Nation at Hartley Bay told the Vancouver Sun it was worried about “huge volumes of pollutants could be pumped into the air associated with the development of a liquefied natural gas industry at Kitimat, affecting the health of the aboriginal community.” Gitga’at councillor Marven Robinson told the Sun that the First Nation is not opposed to LNG, but is questioning the risks and is seeking more information.
Ross said the Haisla Nation Council will likely issue a statement in the coming hours.
LNG Partners LLC, of Houston, one of the backers of Douglas Channel Energy, the BC LNG Douglas Channel Project, a partnership between LNG firms and the Haisla Nation, has signed a preliminary deal with Golar LNG for two tankers.
On October 10, Golar entered into a 90 day Vessel Charter Option Agreement with LNG Partners LLC (Houston, TX) for the provision of two newbuild LNG carriers under long term contract to deliver LNG production from the Douglas Channel LNG Project in British Columbia (BC), Canada.
The Douglas Channel Project, in which LNG Partners is an equity owner, is a proposed liquefaction facility on the west bank of the Douglas Channel, within the district of Kitimat, BC. In addition to prospectively providing two vessels, the agreement confers certain preferential rights for Golar to participate in the project with LNG Partners LLC by way of infrastructure investment or LNG offtake.
In the same report, Golar LNG reported operating income of $70.2 million for the third quarter of 2012, an increase of 21 per cent from the second quarter.
Golar, which has its headquarters in Hamilton, Bermuda, says that since 2001, it has grown from a fleet of six LNG Carriers focused on LNG transportation, to a fleet of 13 vessels (with 13 newbuilds due from quarter three 2013), dedicated to both LNG transportation and midstream floating solutions.
The latter means that Golar is working on what the industry calls Floating Storage & Regasification Units (FSRU). LNG is transferred to the FSRU either for storage or where the low-temperature liquified natural gas is heated back to a gaseous state.
The FSRU storage tanks are generally made from aluminium.
Golar’s report also reflects the weakness in the LNG markets, a factor that is slowing development of the Kitimat LNG projects.
Golar says “a bearish cargo market [for shipping] prevailed in the third quarter with falling prices and weak demand in the Far East. Chartering activity remained thin and lacked direction and consequently, short-term charter rates experienced a correction from rates seen earlier in the year.”
It goes on to say:
Looking to the fourth quarter, weak Far East demand may result in additional vessels being released into the market, however, with limited available modern undedicated vessels a resumption in interest from buyers could very easily pull rates upward again.
As for the world LNG market, Golar says “downward pressure on pricing was experienced primarily due to high inventory levels that persisted East of Suez.”
It also says that more LNG projects are coming onstream which could provide potential competition for Kitimat:
New LNG supply will soon be coming to the market with the commissioning of Angola LNG in the Atlantic Basin. Despite delays at the West African project during the third quarter, exports are expected to start early in the New Year. This represents a set-back of about ten months from the original target date for the country’s first LNG project.
In the Far East, ConocoPhillips and Origin Energy announced the sanctioning of a second train at its Australia Pacific LNG project. The project is planning to bring the first train on late in 2015 with the second train following in 2016. Both trains will be sized at 4.5 million tonnes. Additionally, during the quarter Chevron made positive statements about proceeding with a fourth train at its Gorgon LNG project in Barrow Island, Western Australia. There are currently three trains at Gorgon under construction totalling 15.6 million tonnes.
In addition to Angola, given imminent start-up of the project, supply projects under construction in both the Atlantic and Pacific Basin have reached close to 100 million tonnes, with construction officially beginning at Cheniere’s Sabine Pass LNG export facility.
It was the decision by Cheniere to sell LNG to the Far East markets based on North American prices rather than the higher Japanese price that led to a further delay by Apache earlier this year to give the final go-ahead for the Kitimat LNG project.
A follow up study by the Department of Fisheries and Oceans on the discovery of prehistoric slope failure tsunamis in Douglas Channel concludes that the events would have had minimal impact on Kitimat but would have destroyed Hartley Bay.
The DFO follow up study was aimed at better understanding the dynamics of tsunamis during the two slope failure events on the southern end of Hawkesbury Island during the mid-Holecene period, between 5,000 and10,000 years ago.
The wave dynamic model study does not address the discovery by the Geological Survey of Canada of a possible fault line along Hawkesbury Island which could have been the cause of the slope failures.
The study estimates that the wave amplitude of the first tsunami reaching the proposed Enbridge Northern Gateway terminal site near Kitimat would have been about .09 to .12 metres. Since the actual wave height hitting land from a tsunami is one half of the amplitude, the height of tsunami waves reaching Kitimat at the time would have been about 60 centimetres or 23 inches. At Hartley Bay, on the other hand, the maximum estimated wave amplitude from the second tsunami would have been 15 metres, meaning a wave height of 7.5 metres or about 25 feet.
The main reason for the difference is that both the submarine slope failures occurred south of the dogleg in Douglas Channel at Gertrude Point. That meant the configuration of the channel from Gertrude Point up to Kitimat would lessen the amplitude whereas because Hartley Bay was so close, it would be hit by a higher amplitude. The report says that because of their relatively short wavelengths, the tsunami waves undergo multiple reflections that the “high degree of scattering from the complex shoreline and bottom topography in Douglas Channel” would “combined with the flux of tsunami energy through adjoining waterways and channels” have caused a rapid decrease in the energy of the waves with distance south and north of the slide area.
The study also points out a crucial difference between the ancient slides and the two that occurred near Kitimat in 1974 and 1975, while the land near the head of the Kitimat arm were largely composed of material laid down by the glaciers, the large slope failures on Hawkesbury Island were blocks of an extremely hard igneous rock called diorite. Each of the prehistoric slides would have consisted of about 65 million cubic metres of rock.
The DFO report says
Coastal British Columbia is an area of steep slopes, extreme seasonal variations in soil moisture, large tidal ranges, and the highest seismicity in Canada. Hazards of this form have been well documented for the coastal region of British Columbia, and other fjord regions of the world’s oceans, including Alaska and Norway. These factors increase the potential for both submarine and subaerial slope failures in the region. Such events generally take place in relatively shallow and confined inner coastal waterways, and can present hazards in terms of tsunami wave generation.
The two prehistoric submarine slides are located about 10 kilometres apart on the
slope of southern Douglas Channel, near the southern end of Hawkesbury Island
The report says:
The failures are defined by scallop-shaped hollows located along the edge of the fiord wall and appear to be associated with detached blocks that extend out several hundred metres into the channel. The two block slides identified in Douglas Channel are characteristic of rigid-body submarine landslides, which differ considerably from the well-documented viscous submarine landslides with a lower specific gravity (density relative to water) of about 1.5 that occurred to the north of Douglas Channel along the inner slope of Kitimat Arm in 1974 and 1975.
The report’s modelling is “considered minimum values” because the do not include debris that would have spread into the fiord after initial slide. That debris is now buried by a thick layer of post-slide sediment.
The reconstruction model shows that the head of the more northern slide began at a depth of around 60 to 100 metre, while that of the more southern slide began at a depth of 75 to 120 metres.
The slides would have moved down slope at about 25 metres per second, coming to rest after about 30 seconds, 250 to 350 metres from the slope at a depth of 400 metres.
The northern slide, called by the scientists Slide A:
would have generated extremely large waves in the immediate vicinity of the failure
region within a minute of the submarine landslide. Waves in the numerical simulations reach amplitudes of 30 to 40 metres at the coast near the slide area
Submarine landslides cause delays between the arrival of the first waves and the arrival of subsequent higher waves, increasing in distance from the slide, because of “reflections and non-linear interaction” along the shoreline. For Slide A, the maximum wave amplitudes at Hartley Bay would have been six metres (meaning three metre waves) “Large amplitude waves with typical periods of around 50 seconds would continue for several tens of minutes.”
The leading tsunami waves generated by Slide A reach Kitimat Arm in roughly 20 min and have small amplitudes of only a few centimetres. Although later waves have higher amplitudes, the maximum wave amplitudes (which occur 50-55 minnutes after the failure event) are still only around 0.09 to 0.12 metres.
The southern slide on Hawkesbury, called Slide B by the scientists, would have moved 400 metres before stopping. It stared at a greater depth than Slide A, with not as much vertical displacement than Slide A. That means Slide B was slower than Slide A.
Slide B:
would have generated large waves in the vicinity of the failure region. Simulated waves reach the coast adjacent to the slide region within a minute of the failure event, with wave amplitudes of up to 10 metres. The waves also hit the opposite site of the channel within a minute of the failure event and then take an additional minute to reach Hartley Bay where waves reach amplitudes of 15 metres/ Powerful oscillations in the bay last for tens of minutes.
Waves with high amplitudes (more than 2 metres) also occur in the southern part of Douglas Channel, and in certain locations of Verney Passage.
According to the models, the leading tsunami waves would have reached the Kitimat Arm 22 minutes after the start of the slide. The maximum waves would have had amplitudes of 0.08 metres to 0.3 metres (6 inches), reach the Kitimat Arm 45 to 60 minutes after the start of the failure event.
The the tsunami waves generated by Slide B that impact Kitimat Arm, although still of low amplitude, were somewhat higher than those generated by Slide A, despite the fact that Slide B was located further to the south and generated less energetic waves in the source region than Slide A.
This seeming paradox is explained by the slower motion of Slide B, which causes it to generate more wave energy in the low frequency band…Due to their reduced scattering and reflection, the relatively long and lower frequency waves generated by Slide B propagate more readily through the complex fjord system than the relatively short and higher frequency waves generated by Slide A.
Specifically addressing the proposed site of the Enbridge bitumen terminal, as well as potential tanker traffic in Douglas Channel, the detailed explanation of the modelling accompanying the DFO report says:
If similar submarine slides were to occur again somewhere in the same general area, they could present a significant risk to navigation and to nearby shore installations and coastal communities….
As with the tsunami generation regions, the highest waves and strongest currents in any particular region of the coastal waterway would occur near the shoreline. Based on the numerical findings, tsunamis generated by submarine landslides of the form identified for the southern end of Douglas Channel would have heights and currents that could have major impacts on the coastline and vessel traffic at the time of the event throughout much of Douglas Channel, but a minor impact on water levels, currents and hence vessel traffic in Kitimat Arm. Hartley Bay, at the southern end of Douglas Channel, would be impacted by high waves and strong currents, whereas Kitimat, at the northern end of Kitimat Arm, would experience negligible wave effects. Additional modelling would be required to assess the characteristics of possible tsunamis originating beyond the area of the two identified slope failures.
At the estimated propagation speeds of about 65 metres per second, the detailed model says it takes roughly 10 to 15 minutes for the simulated waves to propagate approximately 40 to 45 kilometres to the intersection of Douglas Channel and Kitimat Arm, where peak wave amplitudes would be diminished to less than one metre. It takes another 15 minutes for the waves to reach sites near the proposed Enbridge facilities in Kitimat Arm where wave amplitudes would be reduced to a few tens of centimetres and associated currents to speeds less than a few tens of centimetres per second.
Bermuda-based Golar LNG has confirmed that it has signed a finalized contract for both feed gas supply and LNG purchase and off-take for train #1 of the Douglas Channel LNG Project, the smallest of the three (so far) proposed LNG projects in Kitimat.
