The Australian Business Review is reporting that Woodside Petroleum, a cash rich Australian energy company, has its eye on Apache’s 50 per cent stake in the Kitimat LNG project. As part of any deal, Woodside would probably also have to buy Apache’s stake in the Australian Wheatstone LNG project, which is also up for sale.
The months-long process by Apache to find a new home for its West Australian domestic gas business and its stake in the under-construction Wheatstone LNG project — as well as its stake in the Kitimat LNG project in Canada — has drawn plenty of interest from parties in that neck of the woods.
The cashed-up, project-hungry Woodside Petroleum has been interested from the outset in the Kitimat stake, but is also said to be prepared to make an offer on Wheatstone if Apache is determined to sell the assets together
Earlier, another Australian newspaper, The Age reported that Woodside’s petroleum and LNG operations had “revenue of $US5.3 billion for the first nine months of 2014. Compared with the corresponding period in 2013, revenue was 28.7 per cent higher for the 2014 period.”Part of the money came from selling natural gas assets in the United States.
According to The Age:
Woodside’s LNG production rose to a record 5.1 million tonnes for the first nine months of Woodside’s fiscal 2014. The record production represents a rise of 17.6 per cent on the same period for 2013. Behind the result was the operational performance of the Pluto LNG facility (Woodside’s interest is 90 per cent). Pluto lifted LNG production by 24.3 per cent on the corresponding period in 2013, to 3.1 million tonnes. Pluto also produced 2.2 million barrels of condensate for the first nine months of 2014. Oil production rose by a mammoth 33.3 per cent on the same period in 2013, to 8.8 million barrels.
On November 6, according to the Sydney Morning Herald, Woodside’s CEO Peter Coleman warned that the Asian customers for LNG who are holding out for cheaper prices could face a “supply crunch” and “By holding out for a cheaper price, customers are potentially exacerbating project FID [final investment decision] delays and may unwittingly help bring on a supply crunch.”
He called on suppliers and customers to work together to ensure supply projects went ahead.
The Woodside website describes the company as “Australia’s largest independent dedicated oil and gas company and one of the world’s leading producers of liquefied natural gas.”
It goes on to say
As we aspire to become a global leader in upstream oil and gas, we are guided by the Woodside Compass. The Compass links Woodside’s core values – respect, integrity, working sustainably, working together, discipline and excellence – with our vision, mission and strategic direction.
Woodside has an extensive portfolio of facilities which we operate on behalf of some of the world’s major oil and gas companies.
We have been operating the landmark Australian project, the North West Shelf, since 1984 and it remains one of the world’s premier liquefied natural gas (LNG) facilities.
With the successful start-up of the Pluto LNG Plant in 2012, Woodside now operates six of the seven LNG processing trains in Australia.
Councillor Phil Germuth questions Northern Gateway officials about their plans for leak detection, Feb. 17, 2014 (Robin Rowland/Northwest Coast Energy News)
Enbridge Northern Gateway officials are loath (to put it mildly) to speak to the media but sometimes they let things slip. Earlier this summer, at a social event, I heard an Enbridge official (probably inadvertently) reveal that when the company’s engineers came before District of Kitimat Council earlier this year they were surprised and somewhat unprepared to fully answer the detailed technical questions from Councillor Phil Germuth on pipeline leak detection.
The results of the municipal election in Kitimat, and elsewhere across BC show one clear message; voters do want industrial development in their communities, but not at any price. Communities are no longer prepared to be drive by casualties for giant corporations on their road to shareholder value.
The federal Conservatives and the BC provincial Liberals have, up until now, successfully used the “all or nothing thinking” argument. That argument is: You either accept everything a project proponent wants, whether in the mining or energy sectors, or you are against all development. Psychologists will tell you that “all or nothing thinking” only leads to personal defeat and depression. In politics, especially in an age of attack ads and polarization, the all or nothing thinking strategy often works. Saturday’s results, however, show that at least at the municipal level, the all or nothing argument is a political loser. Where “all politics is local” the majority of people are aware of the details of the issues and reject black and white thinking.
Northern Gateway’s Ray Philpenko gives a presentation on pipeline leak detection to Kitimat Council, Feb. 17. 2014. (Robin Rowland/Northwest Coast Energy News)
The Enbridge official went on to say that for their company observers, Germuth’s questions were a “what the…..” moment. As in “what the …..” is this small town councillor doing challenging our expertise?
But then Enbridge (and the other pipeline companies) have always tended to under estimate the intelligence of people who live along the route of proposed projects whether in British Columbia or elsewhere in North America, preferring to either ignore or demonize opponents and to lump skeptics into the opponent camp. The Northern Gateway Joint Review Panel also lost credibility when it accepted most of Northern Gateway’s arguments at face value while saying “what the ……” do these amateurs living along the pipeline route know?
Pro Development
“I am pro-development,” Germuth proclaimed to reporters in Kitimat on Saturday night after his landslide victory in his campaign for mayor.
On the issue of leak detection, over a period of two years, Germuth did his homework, checked his facts and looked for the best technology on leak detection for pipelines. That’s a crucial issue here where pipelines cross hundreds of kilometres of wilderness and there just aren’t the people around to notice something is amiss (as the people of Marshall, Michigan wondered at the time of the Line 6B breach back in 2010). Enbridge should have been prepared; Germuth first raised public questions about leak detection at a public forum in August 2012. In February 2014, after another eighteen months of research, he was ready to cross-examine, as much as possible under council rules of procedure. Enbridge fumbled the answers.
So that’s the kind of politician that will be mayor of Kitimat for the next four years, technically astute, pro-development but skeptical of corporate promises and determined to protect the environment.
Across the province, despite obstacles to opposition set up by the federal and provincial governments, proponents are now in for a tougher time (something that some companies will actually welcome since it raises the standards for development).
We see similar results in key votes in British Columbia. In Vancouver, Gregor Roberston, despite some problems with policies in some neighborhoods, won re-election on his green and anti-tankers platform. In Burnaby, Derek Corrigan handily won re-election and has already repeated his determination to stop the twinning of the Kinder Morgan pipeline through his town. In Prince Rupert, Lee Brain defeated incumbent Jack Musselman. Brain, who has on the ground experience working at an oil refinery in India, supports LNG development but has also been vocal in his opposition to Northern Gateway.
The new mayor in Terrace Carol Leclerc is an unknown factor, a former candidate for the BC Liberal party, who campaigned mainly on local issues. In the Terrace debate she refused to be pinned down on whether or not she supported Northern Gateway, saying, “Do I see Enbridge going ahead? Not a hope,” but later adding, “I’d go with a pipeline before I’d go with a rail car.”
Kitimat election signs. (Robin Rowland/Northwest Coast Energy News)
Plebiscite confirmed
Kitimat’s mayor and council elections also confirm that Northern Gateway plebiscite vote last April. Kitimat wants industrial development but not at the price of the community and the environment. The unofficial pro-development slate lost. A last minute attempt to smear Germuth on social media was quickly shot down by people from all sides of the Kitimat debate. Smears don’t usually work in small towns where everyone knows everyone.
Larry Walker, an environmentalist with a track record in municipal politics as an alderman in Spruce Grove, Alberta, won a seat. Together with Rob Goffinet and Germuth, that is three solid votes for the environment. The other new councillor is Claire Rattee who will be one to watch. Will the rookie be the swing vote as Corinne Scott was?
Mario Feldhoff who came to third to Goffinet in the overall vote (Edwin Empinado was second) is a solid councillor with a strong reputation for doing his homework and attention to detail and the unofficial leader of the side more inclined to support development. Feldhoff got votes from all sides in the community.
During the debates, Feldhoff repeated his position that he supports David Black’s Kitimat Clean refinery. But as an accountant, Feldhoff will have to realize that Black’s plan, which many commentators say was economically doubtful with oil at $110 a barrel, is impractical with oil at $78 a barrel for Brent Crude and expected to fall farther. Any idea of a refinery bringing jobs to Kitimat will have to be put on hold for now.
LNG projects are also dependent on the volatility and uncertainty in the marketplace. The companies involved keep postponing the all important Final Investment Decisions.
There are also Kitimat specific issues to deal with. What happens to the airshed, now and in the future? Access to the ocean remains a big issue. RTA’s gift of land on Minette Bay is a step in the right direction, but while estuary land is great for camping, canoeing and nature lovers, it is not a beach. There is still the need for a well-managed marina and boat launch that will be open and available to everyone in the valley.
Germuth will have to unite a sometimes contentious council to ensure Kitimat’s future prosperity without giving up the skepticism necessary when corporations sit on a table facing council on a Monday night, trying to sell their latest projects. That all means that Germuth has his job cut out for him over the next four years.
Updates with corrected figure 156 acres from Rio Tinto Alcan and District of Kitimat
Rio Tinto Alcan has donated 156 acres (63 hectares) of waterfront land on Minette Bay to the District of Kitimat, Gaby Poirier, RTA General manager BC Operations, said Wednesday, November 12, 2014. It’s a major step in getting people in Kitimat access to the waterfront which is being closed off by industrial development.
In a news release, Poirier said.
It is with great pleasure that Rio Tinto Alcan confirms today a gift to the people of Kitimat of approximately 56 acres of water front land that make up District Lot 471, located in Minette Bay.
For more than half a century Rio Tinto Alcan has participated with pride in the development of Kitimat and Northwest British Columbia. In the 1950’s Rio Tinto Alcan developed a company town from mostly undeveloped land. Today it is a mature, vibrant, and highly liveable northern community. We are very proud of our involvement in making this happen.
Now, 60 years later, a new era of industrial development is on our doorsteps. Rio Tinto Alcan’s BC Operations is looking forward to having new neighbours beside us near the smelter site and port terminals. It is important now, more than ever, to ensure the people of Kitimat continue to have direct ocean access.
A view of Minette Bay June 5. 2014. (Robin Rowland/Northwest Coast Energy News)
To that end, Rio Tinto Alcan is pleased and committed, in this our 60th Anniversary year, to transfer ownership of the water front lot DL 471 to the District of Kitimat in trust for its citizens use for all time.
Map shows land that Rio Tinto Alcan has donated to the District of Kitimat (RTA)
Ron Poole, District of Kitimat Chief Administrative Officer, tells Northwest Coast Energy News, “As part of the gifting of Lot 471, RTA has agreed to guaranteeing road access across their property to access this lot.”
“It has roughly one kilometre of waterfront on Minette Bay,” Poole says. “We do not have preliminary plans for the site, however, council for years has been negotiating with RTA to provide water access and this is one lot they owned that meets the public need.”
If the Shell-led LNG Canada project goes ahead, with LNG Canada taking over the old Eurocan dock (it already owns the old Methanex dock), that means Rio Tinto Alcan would have to expand its port facilities at “Terminal A” (the original port) and that would cut off access to Hospital Beach which has been the only beachfront available to residents since the 1950s.
All Farris would say is, “We have lots of people working on the projects to do just that.”
At that same time, Apache is still spending money on the Kitimat project. The quarterly report says that Apache spent $151 million on the project in the third quarter, and a total of $498 million so far this year. That includes an equity investment in the Pacific Trail Pipelines $15 million in the third quarter and $44 million so far this year.
Chevron, Apache’s partner continues to work on the Kitimat project.
You might not be seeing it at the gas pumps at the moment, but you soon will, the price of gas has gone down by 30 per cent since June.
Prices of key commodities, oil, coal and iron ore are dropping. And the weakness in the market for two of those commodities oil and iron ore should be setting off the alarm bells in Kitimat and the northwest.
The declining price of oil will soon affect all those energy-related projects that are supposed to bring an economic renaissance to northwest British Columbia.
As for iron ore, people might ask, what does iron ore have to do with us, there are no iron mines or steel mills around here.? However, in the highly integrated world economy, Rio Tinto is one of the world’s largest producers of iron ore, the decline in iron ore prices is affecting Rio Tinto’s bottom line and that is why, analysts say, the company may be vulnerable to a take over by the little known commodities giant Glencore.
The oil industry has always experienced very long, slow and deep cycles in supply, demand and prices: the current downturn is no exception.
Kemp says the current up cycle began around 2002, with rising oil prices. The financial collapse in 2007 and 2008 briefly interrupted the cycle but now according to Kemp and other analysts there is a glut of oil on the market and prices are falling world wide.
High prices meant not only new plays, especially in the Alberta bitumen sands, but also stronger efforts to save money by increasing energy efficiency and, yes, turning to cheap natural gas.
There are also new factors at play. In the past when there was a downturn in oil prices, OPEC led by Saudi Arabia, would limit supply to keep the price at a profitable level. However, the flood of oil on to the market from shale oil plays, mainly in the United States but also in Canada, has meant that OPEC can’t do that anymore. Too much competition. So the analysts say, the Saudis and other OPEC members are actually starting a price war to retain market share.
When Kemp was writing last week, he said the key marker, North Sea Brent crude:
if prices are adjusted for inflation (using average U.S. hourly earnings), Brent prices are at the lowest level in real terms since October 2007, exactly seven years ago.
There has always been a lot of skepticism among long term residents of Kitimat who have seen boom and bust cycles before and so they, rightly as it turns out, have been wary of industrial promises. Then there’s the current housing debate which may soon see the out of region speculators and developers caught with their pants down in the midst of a Kitimat January blizzard.
The commodity downturn also shows the foolishness of the politicians, business people and commentators who kept saying that BC is a “natural resource economy” and restrictions on corporations and strong environmental requlations will only hurt that economy. Who needs diversification? Who needs a fishing guide anway? It is fairly clear already that Christy Clark’s promises of a debt free province have as much credibility as speculating in Dutch tulip bulbs.
As for the idea among some here that if Kitimat had only voted in favour of Enbridge Northern Gateway, the gates to ecomonic paradise would open, that is foolishness. You can be certain when the Saudi princes decided on a price war to keep themselves in the luxorious lifestyle which they believe they are entitled, they didn’t consider whether Kitimat voted for or against Northern Gateway.
Part of the impetus behind constructing new pipelines to carry bitumen from northern Alberta to the U.S. Gulf Coast, Kitimat on the Pacific, or even all the way across the country to Saint John, N.B., was to help close the substantial discount between Canadian oil and world prices. Well, crude’s recent drop into the $85‑a‑barrel range has basically collapsed the once wide‑open spread that had existed between West Texas Intermediate and Brent crude with hardly any new lengths of pipe being laid into the ground at all.
Rubin went on to note that the decision by the Saudis to launch the price war has changed everything.
For pipeline companies with major proposals on the table, such as TransCanada and Enbridge, falling oil prices are a game‑changer of the same magnitude that rising prices were a decade ago. Back then, soaring prices created an urgent need to build new pipelines to connect North America’s burgeoning supply to coastal refineries and world markets.
We’re now in a different world. At the root of today’s problem is global demand that is no longer growing quickly enough to support the prices necessary to keep expanding expensive unconventional sources of supply such as the oil sands. Lower prices will effectively strand those reserves regardless of the transportation options that may become available. Even if President Obama approved Keystone XL or the National Energy Board gave the green light to Energy East, falling commodity prices mean that soon there might not be enough oil flowing out of northern Alberta to fill those new pipelines.
This week’s near disaster with the Russian container ship Simushir, where the coast of Haida Gwaii was saved by a change in the wind direction, hasn’t helped either.
Will the refinery fade to black?
Economists have always been skeptical about David Black’s plan for the Kitimat Clean refinery and Black has admitted that he also had not much support for the refinery idea either from the hydrocarbon indusry or from government.
Most important, Black has said that he as a businessman intends to eventually make a profit by selling refined product. In fact on his website, Black said he expected the refinery to go into profit after just seven to ten years of operation.
But now comes the flaw in Black’s business plan. According to the website, the Kitimat Clean project is based on North Sea Brent Crude priced at $110 US a barrel. The refinery would take advantage of the “discount” on deliveries of Alberta bitumen crude which the site estimated at $35 a barrel. Black’s site says the refinery would be profitable if it could purchase bitumen at a $23 discount, making $12 a barrel over the world price.
Unfortunately, as of this writing, 11 am on October 20, the price of Brent Crude is now $85.79 and dropping slightly. West Texas Intermediate Crude, the other bench mark is even lower at $82.79 a barrel.
It looks like the drop in oil prices wipes out Black’s plan for profitability, since Brent Crude is already $25 a barrel cheaper than Black had projected.
What’s that got to do with the price of gas?
The falling price of crude oil is also going to have a major impact on the liquified natural gas projects in the northwest. The current economic situation will soon see the short term players and speculators cut and run, leaving, it is hoped, a couple of long term players in the west coast LNG terminal market. However the volatility in the dropping oil market may mean that the all important Final Investment Decisions are delayed yet again.
That’s because, at the moment, in Asia, the price of natural gas is calculated as a per centage of the price of crude oil, what is called the Japan Cleared Customs price. And as the LNG Journal has reported the price of LNG in Japan has dropped to the 2009 level.
East Asian Delivered LNG Indicator Price hit its lowest level since 2009 at $12.30 million British thermal units with European Brent crude oil prices collapsing to $82.85 per barrel. The East Asia LNG price is based on the Japanese Crude Cocktail method of assessing long-term contract cargo prices for Japan, based on oil which last hit current levels and then slipped below $80.00 per barrel during 2009.
The idea of LNG exports, especially since the Japanese earthquake in 2011, is that the companies can make a big profit by buying natural gas at low North American prices, exporting and then selling at the higher Asia price. In a free market world, however, the Asian countries and companies have, for the past few years been balking at buying at the higher JCC price and attempting to buy at the much lower North American Henry Hub price which at this writing was $3.72 MMBTu. Today’s JCC LNG price was $12.75, still higher than the North American price, but as LNG Journal notes, at a five year low.
Weaker oil prices may put proposed LNG projects “to sleep for a number of years,” Fereidun Fesharaki, chairman of Facts Global Energy, an industry consultant, said in a phone interview. “For the projects that are already under construction, it hits their pocketbooks seriously.”
Prices below $80 a barrel may be a “disaster” for some projects, said Fesharaki, who forecasts Brent may decline to $60 a barrel before the end of the year, then rebound to about $80 by the end of 2015.
and
“There’s no doubt if we were to see the type of crude oil prices we’re seeing now continue they would be looking at lower LNG prices,” Daniel Hynes, senior commodity strategist at Australia and New Zealand Banking Group Ltd., said by phone. “On face value, it would put pressure on margins.”
Long term LNG prospects
On the other hand, long term prospects for LNG exports are good. Demand in the Asian markets is still growing.
According to the Nikkei Asian Review, the Japanese Ministry of Economy, Trade and Industry projects that by 2020, 70 per cent of Japan’s LNG will come from Australia and North America. That doesn’t mean that Canada won’t have rivals, the projections say that the United States, which is just starting many of its LNG export projects could be Japan’s third largest customer with Canada in fourth place.
There are big benefits to getting LNG from North America and Australia. The unlikeliness of pirate attacks is one. There is also less political uncertainty. And then there is the price. U.S. shale gas, for example, costs about 20% less than what Japan currently pays for LNG.
Diversification
With the Rio Tinto Alcan Kitimat Modernization Project construction phase winding down, with some uncertainty about the future of Rio Tinto itself and with more possible delays in the Final Investment Decisions for LNG Canada and Kitimat LNG, Kitimat needs a Plan B (and a Plan C or D or E).
The idea of a retirement community is no longer viable, costs of housing, even if they drop, are just too great.
Kitimat’s second strength has always been tourism and fishing. In 2015, there must be stronger efforts of support both fishing and tourism, which, in the long term will support that regions economy through good times and bad.
That means the new council must be firm in demanding (yes demanding) full access to the Kitimat waterfront and that includes a well-managed marina or marinas that have the capacity for recreational, adventure and fishing guiding and industrial use.
The District of Kitimat must come up with a plan that will promote the advantages of the region as a tourist and fishing destination. While the Chamber of Commerce has being doing a good job, up to now as the main promoter of tourism, Kitimat’s public image across Canada and the world is soley industrial and the District should assume more responsiblity for changing that image. The economic development staff at the district have been working largely on large scale industry. It should devote more time and money to the natural wonders of the area.
The plan B should also mean balance. Balance between industry and environment. The sneering contempt for those who want to protect the environment of the northwest is short sighted thinking, because a large proportion of the economy will depend for decades to come on attracting visitors to the wild beauty of of this part of British Columbia. That means, as much as it can within municipal powers, the new council must strengthen environmental protection in Kitimat.
Back in the 50s, Kitimat was planned for a future, a future that didn’t exactly work out when the price of aluminum slumped in the early 60s. Now we’re facing a slump in energy prices, so those plans will change. The plan B must include, as much as possible, creating a mainstay base that will smooth out the boom and bust of the commodities cycle.
The motto on the Kitimat snowflake logo is “A marvel of nature and industry.” The new council should make sure that motto is applied during the coming years.
The Shell-led LNG Canada project unveiled its commitments to Kitimat at a ceremony at the community information centre at the old Methanex site on October 7, 2014.
LNG Canada has forged the commitments in a sheet of aluminum that is bolted to the wall of the community information centre. Kitimat Mayor Joanne Monaghan unveiled the aluminum sheet, assisted by Kitimat Fire Chief Trent Bossence. Afterward, Susannah Pierce, Director, External Affairs, LNG Canada, signed the sheet, followed by Mayor Mongahan, Chief Bossence, other LNG Canada officials and members of the community.
Guests at the unveiling of LNG Canada’s commitment to the Kitimat community watch a video prior to the unveiling ceremony. (Robin Rowland/Northwest Coast Energy News)
LNG Canada’s Community Commitments
LNG Canada is proud to outline its commitments to the community, created through a collaborative effort with local residents. In April, June and September 2014, LNG Canada met with the Kitimat community to develop and refine the commitments our company will meet to ensure we are a valued member of the community throughout the lifetime of our project. We are grateful to the many individuals who took part and shared their wisdom and experience.
Our Commitments to the Community
1) LNG Canada respects the importance residents place on companies being trusted members of their community. We aspire to gain this trust by proactively engaging with the community in an honest, open and timely manner; by listening and being responsive and accessible; and by operating in a safe, ethical and trustworthy way.
2) LNG Canada understands that the ongoing well being of the community and the environment are of paramount importance. LNG Canada will consider the health and safety of local residents, employees, and contractors in every decision it makes.
3) LNG Canada recognizes that the environment and natural surroundings are vital to the community. We will be dedicated to working independently and with the community to identify and carry out ways to reduce and mitigate the impact of our facility footprint on the natural surroundings – in the Kitimat Valley, the Kitimat watershed and the Kitimat airshed.
4) LNG Canada is aware of the importance to the community of maintaining and improving access to outdoor recreational opportunities. We will work with the local community to facilitate the creation of new projects that protect or enhance the natural environment and that provide access to the outdoors and the water.
5) LNG Canada recognizes it will be one company among other industrial companies operating in the community. We will work with other local industry leaders to manage and mitigate cumulative social and environmental impacts, and create opportunities to enhance local benefits associated with industrial growth.
6) LNG Canada acknowledges that the commitments we make are for the long term. We will work with the community to develop an environmental, social and health monitoring and mitigation program that meets regulatory requirements and we will share information on the program with the public for the life of our project.
7) LNG Canada understands the need for the community to benefit from our project and values the contributions all members of the community make to the region. We will work with the community to ensure that social and economic benefits from our project are realized and shared locally.
8) LNG Canada acknowledges the importance the community places on our company being an excellent corporate citizen and neighbour that contributes to the community. In addition to providing training, jobs and economic benefits, we will make social investments important to the community to positively impact community needs and priorities.
Kitimat mayor Joanne Monaghan, Susannah Pierce, Director, External Affairs, LNG Canada and Fire Chief Trent Bossence after the ceremony unveiling the community commitment. (Robin Rowland/Northwest Coast Energy News)
The world’s business media are paying rapt attention to Glencore’s now stalled attempt to take over Rio Tinto.
Late Tuesday, the company issued a news release which says
Glencore announces that in July 2014 it made an informal enquiry by telephone call to Rio Tinto, seeking to gauge whether there might be any interest at Rio Tinto in investigating some form of merger between the two companies. Rio Tinto responded that it was not interested in pursuing these discussions.
Glencore confirms that it is no longer actively considering any possible merger transaction with, or offer for the shares of, Rio Tinto.
As a consequence of this announcement, the Panel Executive has determined that Glencore is for a period of 6 months from the date of this announcement subject to Rule 2.8 of the City Code on Takeovers and Mergers in relation to Rio Tinto. Glencore however reserves its rights to make an offer in the future with the consent of the Takeover Panel, either with the recommendation of the Board of Rio Tinto, in the event of a third party offer for Rio Tinto, or in the event of a material change in circumstances.
The board of Rio Tinto notes the recent press speculation regarding a possible combination of Rio Tinto and Glencore.
The Rio Tinto board confirms that no discussions are taking place with Glencore.
In July 2014, Glencore contacted Rio Tinto regarding a potential merger of Rio Tinto and Glencore.
The Rio Tinto board, after consultation with its financial and legal advisers, concluded unanimously that a combination was not in the best interests of Rio Tinto’s shareholders.
The board’s rejection was communicated to Glencore in early August and there has been no further contact between the companies on this matter.
According to Bloomberg, Glencore’s secretive CEO Ivan Glasenberg made a verbal stock offer to Rio Chairman Jan Du Plessis in July. The Rio Tinto board rejected the offer in August, which means under that UK law, Glencore must wait six months before making another bid.
Glasenberg’s informal July bid carried no significant premium, said the person, who asked not to be identified as the information is private.
Bloomberg’s television arm reports that the Glasenberg’s offer was in stock, an attempt, apparently, to get Rio Tinto “on the cheap.” Earlier Forbes reported that there were rumours of an offer from Glencore to Rio Tinto of a “share-swap merger”
Bloomberg goes on to report that.
After being rebuffed by the board, Glencore has reached out to Rio’s biggest investor, Aluminum Corp. of China, to gauge its interest in a potential deal in the next year, according to people familiar with the matter.
After the initial report on the takeover Monday, business writers used epic analogies.
Meanwhile, behind its premium paywall Lex, the Financial Times is comparing the Glencore bid for Rio Tinto to the Game of Thrones.
The analysts are saying there are two main factors, Rio Tinto’s balance sheet has been weakened by a downturn in the iron ore market while at the same time Glencore aims to overtake Rio Tinto rival BHP Billiton. If it acquires RT, then Glencore will become the world’s largest mining and resource company.
The business media all say Glencore is already the world’s biggest trader in commodities.
China is a major force behind this corporate Game of Thrones. China wants more access to world resources for its increasingly hungry industry and population,while at the same time it has apparently all the iron ore it needs and iron ore is Rio Tinto’s biggest asset. The key player is a giant Chinese aluminum company now under investigation as part of the country’s corruption crack down.
Glencore is already huge, listed as Number 10 on the Fortune Global 500 list . Rio Tinto is far down at number 201. (Walmart is number one. Companies involved with Kitimat are Shell in second place, Sinopec in third and the China National Petroleum Corporation in fourth. Chevron is in 12th spot.)
Glencore is a major player in the aluminum business with assets around the world, some in partnership with the Russian giant aluminum group Rusal . According to Wikipedia, Glencore owns 8.8 per cent of a joint venture with Rusal, and the Sual Group (Siberian-Urals Aluminium Company) . That joint venture, Wikipedia says, has created the “World’s largest aluminium and alumina producer with 110,000 employees in 17 countries.”
Glencore along with Rusal has an undisclosed interest in Rusal’s Windalco alumina operation in Jamaica. Glencore also has an undisclosed interest in the Alumina Partners of Jamaica. It owns 44 per cent of Century Aluminum in Monterey California. Glencore has also undisclosed interests in idle aluminum smelters in Washington State and Montana. It has an undisclosed interest in Kubikenborg Aluminium AB in Sweden, Aughinish Alumina in Ireland and Eurallumina in Sardinia.
In the northwest, Glencore, through its agricultural subsidiary Vittera, is a partner, along with Cargill Ltd. and Richardson International in the Prince Rupert Grain Terminal. In Vancouver, Glencore owns Vittera’s Cascadia grain terminal in Vancouver.
located on the south shore of Burrard Inlet. Vittera Inc. owns and operates Canada’s largest grain handling network. The terminal handles wheat, durum, feed barley, malting barley, canola seed and specialty products, with storage capacity of 282,830 tonnes of product, handling loading from its 244 metre berth with a depth of 14.6 metres. –
Glencore is also developing a metallurgical coal mine near Chetwynd.
A Glencore stock photo of slag tapping at the Sudbury Smelter. (Glencore)
Glencore, through the earlier 2013 take over the mining company Xstrata owns the famous Kidd copper and zinc mine near Timmins, Ontario. The operation has 1300 employees. (Xstrata earlier took over the well-known Canadian mining company Falconbridge). It also operates the Horne copper Smelter in Rouyn-Noranda, Québec, which employees 700 and the CCR copper Refinery in Montreal, Québec which employees 650.
In Sudbury, Glencore is reviving the Errington-Vermillion Project, two deposits were that were previously mined in the 1920s and 1950s. It says the project has potential for approximately nine million tonnes, polymetallic- zinc, lead,copper, silver, gold or a rate of 2,900 tonnes per day.
The other factor for Kitimat with Glencore is that, unlike Rio Tinto, which is mostly a mining and smelting company, Glencore has interests in natural gas, oil and shipping and it is reported that the company wants to expand its hydrocarbon business from extraction to shipping.
According to Forbes, many Rio Tinto shareholders are not happy about the costs of the takeover of Alcan
The chairman of Rio Tinto, Jan du Plessis said the board was happy with the leadership of managing director, Sam Walsh, and finance director, Chris Lynch.
Interestingly, that might not be a view shared by all Rio Tinto shareholders who are still smarting from the $40 billion written off after the ill-timed acquisition of the Alcan aluminium business, followed by a $3 billion write-off after an equally poorly executed coal asset deal in Africa.
(It should be noted that Walsh was not the CEO at the time of both acquisitions, but was brought in to put Rio Tinto back on track after those huge losses)
The Rio Tinto news release says it’s business as usual:
Rio Tinto remains focused on the successful execution of its strategy, which the board of Rio Tinto is confident will continue to deliver significant and sustainable value for shareholders….
The board believes that the continued successful execution of Rio Tinto’s strategy will allow Rio Tinto to increase free cash flow significantly in the near term and materially increase returns to shareholders. Rio Tinto’s shareholders stand to benefit from the very considerable value that this will generate.
RBC Capital Markets analyst Timothy Huff said: “A potential merger with Rio would enable Glencore to get hold of the lowest-cost iron ore business in Australia. This is likely just a shot across the bow from Glencore and we expect Glencore to play the long game with any highly desired acquisition target. While asset divestments may have to play a larger part in a Glencore/Rio tie-up, we think the broader strategy for an enlarged group makes sense.”
The Globe and Mail Report on Business says
It is an open secret that Mr. Glasenberg, a multibillionaire South African, has every intention of using mergers and takeovers to greatly extend Glencore’s reach along the commodities value chain. Glencore’s strategy is to control the mines, the warehouses, the ports, the ships and the trading networks that produce and distribute commodities.
The question is whether Rio’s management and shareholders would endorse a deal that could come with no takeover premium. Some analysts think not.
One problem with Glencore’s approach to Chinalco is that the company is part of the wider probe by the Chinese government of corruption. As Reuters reported
Aluminum Corp of China general manager Sun Zhaoxue is suspected of “serious violations” of the law, a euphemism for corruption, according to a notice published by China’s Central Commission for Discipline Inspection.
Sun is also the vice chairman of Chinalco’s listed subsidiary, Aluminum Corp Of China Ltd. He is the former president of China National Gold Group Corp, the country’s biggest gold producer.
Some business analysts say even if Rio Tinto shareholders are not happy with current management they may not want their holdings affected by a possibly corrupt Chinese company.
On the other hand, as the Telegraph points out, it is really the Chinese government that will make the decision, not the company itself.
China’s government holds the key to a deal despite Rio Tinto’s public rejection of Glencore’s interest. State-owned Aluminum Corporation of China is the largest shareholder with around 10 per cent and Glencore reportedly started talking to the Chinese in the summer to sound out their interest in an exit. Although China is the world’s largest consumer of iron ore and owning such a significant stake in one of the world’s biggest mining groups is strategic now could be a good time to exit. The world is flooded with iron ore and securing supplies for steel mills is no longer an issue for the Chinese government. Now is a good time to cash in.
The man behind the so-far failed deal, who is likely “patiently stalking” Rio Tinto is the highly secretive and private Ivan Glasenberg.
Pounce, leak and wait.
It is a classic strategy in the shadowy world of mergers and acquisitions and Ivan Glasenberg, the chief executive of Glencore, is a master of this dark art.
Although a potential $160 billion mega takeover of the world’s largest shipper of seaborne iron ore, Rio Tinto, was flatly rejected in August, don’t bet on Glasenberg walking away for good
Glasenberg was born in South Africa in 1957, and apparently now holds four passports, South Africa, Australia, Israel and as of 2011, Switzerland.
When Glencore went public on the London Exchange in 2011, which the Guardian called “the biggest stock exchange float in British history,” the British media received a letter from a London law firm warning the normally aggressive media not to probe into the private lives of the company executives.
Glencore executives, the letter said, “are extremely private individuals”, who expected scrutiny of their business activities, but not their personal lives. A warning followed about the “security risk” that could be posed by any reports about their homes or private lives.
It appears that for the British media the royal family and missing school girls are fair game but not Glencore’s executives.
Should Glencore ever takeover Rio Tinto, the Wall Street Journal says Glasenberg told the paper Glasenberg: We Don’t Do Work-Life Balance may be a indication of the future, especially for management.
Although he was referring mainly to the company’s main business, commodity trading, the interview is enlightening.
Asked in an interview with The Wall Street Journal if the company has a work-life balance, the 57-year-old billionaire, a former coal trader, says: “No. We work. You don’t come here to take life easy. And we all got rich from it, so, you know, there’s a benefit from it.”
This competitiveness, he says, is smart business. “If I’m not pulling my weight and setting an example” and “traveling 80% of the time”, his charges would complain to the board and try to get him fired….
Mr. Glasenberg says the phenomenon is still at play. “I see it happening. Some guy suddenly decides: ‘I want to take it easier, I want to spend more time with the family’… an attack will come.”
Mr. Glasenberg, who had been CEO of Glencore since 2002, says he is insistent on instilling this culture at Xstrata, a mining company. Glencore had amassed a portfolio of mines over the past decade. “I thought if we could put our hard-working culture as traders into the asset management it will be a great combination and we did do that,” he says.
One area where Glasenberg does get soft however is on worker mobility, noting that blue collar miners can work their way up to earning the eight-figure salaries enjoyed by his squadron of commodities traders. Just try him.
“You want to be a trader, come be a trader,” he told Wall Street Journal. “You want to travel six days a week, you want to travel the world, the door’s open. I earn more than you. Come be a trader. Please, the door’s open.”
If the Glencore news release is correct, that means in six months, on April 7, 2015, the next move in the future of Rio Tinto will come, unless, as the Glencore news release states “if there is a material change in circumstances”
One thing is clear, Kitimat can now add Rio Tinto and Rio Tinto Alcan to the mix of uncertainty along with Shell, Chevron, Enbridge, Apache and the rest of the corporate movers. In other words, we are all extras in the corporate Game of Thrones.
Chevron Corporation says its wholly-owned subsidiary, Chevron Canada Limited, has reached agreement to sell a 30 per cent interest in its Duvernay shale gas play to Kuwait Foreign Petroleum Exploration Company’s wholly-owned subsidiary, KUFPEC Canada Inc., for $1.5 billion.
The total purchase price includes cash paid at closing as well as a carry of a portion of Chevron Canada’s share of the joint venture’s future capital costs. The Duvernay is located in west-central Alberta, and is believed to be among the most promising shale opportunities in North America.
The agreement creates a partnership for appraisal and development of liquids-rich shale resources in approximately 330,000 net acres in the Kaybob area of the Duvernay.
“This sale demonstrates our focus on strategically managing our portfolio to maximize the value of our global upstream businesses and is consistent with our partnership strategy,” said Jay Johnson, senior vice president, Upstream, Chevron Corporation. “The transaction provides us an expanded relationship with a valued partner. It also recognizes the outstanding asset base we have assembled.”
Following the closing of the transaction, Chevron Canada will hold a 70 percent interest in the joint venture Duvernay acreage and will remain the operator. The transaction is expected to close in November 2014.
“We remain encouraged by the early results of our exploration program and view the Kaybob Duvernay as an exciting growth opportunity for the company,” said Jeff Shellebarger, president of Chevron North America Exploration and Production Company.
Chevron Canada has drilled 16 wells since beginning its exploration program, with initial well production rates of up to 7.5 million cubic feet of natural gas and 1,300 barrels of condensate per day. A pad drilling program recently commenced which is intended to further evaluate and optimize reservoir performance as well as reduce execution costs and cycle time.
There’s a dumb, dumb, really dumb idea that just won’t go away—that Enbridge could solve all its problems if only, if only, it would send the Northern Gateway Pipeline to Prince Rupert.
Enbridge long ago rejected the idea. Before Enbridge updated its website to make Gateway Facts, to make it slick and more attractive, the old website had an FAQ where Enbridge explained why it wasn’t going to Prince Rupert.
Did you consider running the pipeline to Prince Rupert where a major port already exists?
We considered Prince Rupert and Kitimat as possible locations. We carried out a feasibility study that took into account a number of considerations. The study found that the routes to Prince Rupert were too steep to safely run the pipeline, and that Kitimat was the best and safest option available.
Current proposed route for the Northern Gateway pipeline. (Enbridge)
Here in the northwest even the supporters of the Northern Gateway roll their eyes when they hear the old Prince Rupert story come up again and again – and it’s not just because these people support the Kitimat plans for Northern Gateway, it’s because those supporters (not to mention the opponents) have driven along the Skeena from Terrace to Prince Rupert.
There just isn’t any room for a pipeline. It’s a game of centimetres.
A rainbow hugs the mountains near the Telegraph Point rest area on the Skeena River between Terrace and Prince Rupert, Sept. 29, 2014. Traffic is seen on the narrow corridor between the mountains and the river (Robin Rowland/Northwest Coast Energy News)
Alternatives to Kitimat?
Now the new premier of Alberta, Jim Prentice, who should know better if he’s going to lead that province, is hinting that Kitimat isn’t the only possible solution for the Northern Gateway.
Without specifying Prince Rupert, according to Gary Mason reporting in The Globe and Mail, Prentice was speculating about an alternative to Kitimat.
Asked whether he believes the Gateway terminus should be relocated to Prince Rupert or another destination, Mr. Prentice said, “Everything I’ve heard from the Haisla who live there is they don’t agree with the terminal being in Kitimat.” Is it possible to get First Nations approval if there is no support at the planned terminus site? “It’s pretty tough,” the Premier said.
Prince Rupert has a thriving local fishing industry that employs hundreds of people and is critically important to the local First Nations. He is convinced the community would not be willing to put that at risk.
“Overwhelmingly people in my community are much more comfortable with liquefied natural gas, with wood pellets, with coal, than any oil product,” he said.
The Prince Rupert Port Authority also rejected the idea
A spokesman for the Prince Rupert Port Authority said Wednesday there is currently no room for Enbridge to build at the port even if it wanted to. “We are fully subscribed,” Michael Gurney said. There are two large vacant lots within the port authority’s jurisdiction, but both are locked by other energy companies, earmarked for LNG projects.
So not only is there no room on the road to Prince Rupert, there is no room in Prince Rupert.
Shovel-ready?
Let’s just consider for a moment that if Prince Rupert was the ideal location for the Northern Gateway terminal (which it is not), what would be needed to get the project going today.
The Northern Gateway Joint Review Panel would have be reconstituted or a new JRP created by the National Energy Board. That’s because the bitumen comes from Bruderheim, Alberta, crossing provincial boundaries and thus it’s in federal jurisdiction.
Even under the fast track rules imposed on the NEB by Stephen Harper’s Conservative government, new environmental and social impact studies would be required, starting from scratch. So add another five years of paperwork before a single shovel goes into the ground.
The pipeline would have to cross the traditional territory of First Nations that, so far, have not been part of the negotiations, mostly the Tsimshian First Nation as well as the Nisga’a First Nation which has a treaty establishing local rule over their territory.
Traditional leaders of the Gitga’at First Nation lead a protest march through the streets of Prince Rupert, February 4, 2012. (Robin Rowland/Northwest Coast Energy News)
In February 2012, the largest anti-Enbridge demonstration outside of the Lower Mainland took place in Prince Rupert, with the elders of the Tsimshian First Nation welcoming the elders and members of the Gitga’at First Nation, at Hartley Bay, which had organized the protest.
When I say there isn’t room for a pipeline along the Skeena, it also means that there isn’t any room for the pipeline corridor right-of-way. Enbridge, in its submissions to the Joint Review Panel, said it requires a 25 metre wide right of way for the pipeline corridor. (For the record that’s just over 82 feet).
Along that highway, as you will see, there’s barely enough room for the CN mainline and Highway 16 (also known as the Yellowhead Highway) and on a lot of places both the highway and the railway roadbed are built on fill along the side of a cliff.
Albertans’ desperate desire to see the Northern Gateway go to anywhere to what they call “tide water” keeps coming up like the proverbial bad penny. The latest came when Jim Prentice speculated about a new route for the Northern Gateway.
I knew I had an appointment coming up in Prince Rupert on Monday, September 29. So I decided that only way to prove to people sitting in Calgary, Edmonton and Fort McMurray playing with Google Maps that the pipeline to Prince Rupert was a really dumb idea was to shoot photographs to show just why the Northern Gateway will never go to Prince Rupert—at least along the Skeena.
As you drive out of Terrace, you pass two large swing gates (also called by some “Checkpoint Charlie” gates after the Cold War era crossing in Berlin.) At the first rest stop west of Terrace, there are another set of gates at the Exstew. There’s a third set of gates just outside Prince Rupert.
A logging truck passes the avalanche gates at Exstew on Highway 16, Sept. 29, 2014. (Robin Rowland)
The swing gates are avalanche gates and, in the winter, Highway 16 can be shut down if an avalanche closes the highway or the danger from avalanche is too great to allow motorists to proceed. When you drive the highway from Terrace to Prince Rupert in the winter (the signs were covered up when I drove Monday) you are warned “Avalanche danger Next 13 kilometres. No stopping.”
The Exstew avalanche gates, (Robin Rowland/Northwest Coast Energy News)
The drive along the Skeena from just west of Exchamsiks River Provincial Park all the way to Tyee where the highway turns inland to reach northwest to Prince Rupert on Kaien Island is one of the most spectacular drives on this planet. The highway snakes along a narrow strip of land with steep mountain cliffs on one side and the vast river on the other.
The problem is that apart from locals and tourists, none of the “experts” whether journalist, think tanker, bureaucrat or politician have, apparently ever driven from Prince Rupert to Terrace.
When both Opposition Leader Tom Mulcair and Liberal Leader Justin Trudeau were in the northwest earlier this summer to “engage” with the local people, apart from short boat trips down Douglas Channel, they flew everywhere. Scheduling you know. Stephen Harper has never visited northwest BC and probably never intends to. His cabinet members fly in for photo ops and then are on the next plane out of town.
Of all the visiting journalists who have come to the northwest only a couple have bothered to drive around the region. Most fly-in fly-out. These days, most often budget-strapped reporters never leave their offices, interviewing the same usual suspects by phone on every story.
On Monday, I took most of the photographs on my way back from Prince Rupert to Terrace after my appointment, so the sequence is from west to east. There are also very few places along the river where you can safely stop. There are concrete barricades on both sides of the highway to prevent vehicles either going into the river or onto the narrow CN right-of-way.
There are, however, two rest stops and a number of small turnoffs on the highway, the turnoffs mainly intended for use by BC Highways, but which are also used by tourists, fishers and photographers.
The first image was taken at one of those highway turnoffs just east of Aberdeen Creek. This is what the highway and rail corridor are like all along the Skeena, the highway, bounded by concrete barricades, the CN rail line and then the towering mountains. Note where the telegraph and telephone lines are—further up the cliffside.
A closer view of the highway and rail corridor just east of Aberdeen Creek.
Here is the view of the Skeena River from the Aberdeen Creek turnoff. You can see to the east, a mountain and the narrow strip of fill land that supports the highway and the rail line.
You see the broad width of the mighty Skeena, the Misty River, as it is called by the Tsimshian First Nation and by everyone else who lives in the northwest and on the right side of the image, the highway and rail corridor built on fill.
Any room for a pipeline?
There’s another turnoff on the other side of the headland east of Aberdeen Creek, looking back the way we came.
The final small turnoff is just by the Kylex River. Again you can see how narrow the highway and rail corridor are.
A few kilometres further along—as I said the highway snakes and curves its way along the riverbank– you come to the Basalt Creek rest area. So this telephoto image shows a logging truck heading west, taken from Basalt Creek, looking back at the highway.
Again you can see both the highway and CN line are built on fill. Is there any room for a pipeline?
Any room for a 25 metre pipeline right-of-way?
Between Basalt Creek and Telegraph Point, a few kilometres to the east, again the highway and rail line hug the narrow strip between the river and mountains.
This shot, taken from Telegraph Point, in October 2013, shows a CN intermodal container train heading to Prince Rupert. The container trains and the coal trains usually have between 150 and 180 cars. If a winter avalanche took out a train, there would be environmental damage, but that damage would be insignificant from coal or containers compared to a train of railbit tankers carrying diluted bitumen.
At Telegraph Point, the second of the three rest stops between Prince Rupert and Terrace, again there is just a narrow strip between the mountain, the highway and the river.
Across the highway from the rest stop, you can again see the narrow corridor, the first shot looking west the rail line close to the cliff face, the second, east, with the waterfall, which you don’t see during the rest of the year, fed by the fall monsoon.
Two shots from the same location, Telegraph Point, taken in March, 2013, of a CN locomotive hauling empty coal cars back to the fields around Tumbler Ridge. (No waterfall in March)
Alternative routes
Everyone has assumed that if Northern Gateway changed its route, the most likely choice given the configuration of the pipeline at the moment is to follow the Skeena.
There are alternatives. The Petronas LNG project and its partner TransCanada Pipelines have proposed a more northern cross-country route, which would go north from the Hazeltons, avoiding the Skeena
If Enbridge wanted to try a northern route, similar to the one TransCanada contemplates for Petronas, Northern Gateway would again run into trouble.
It would require reopening or creating a new Joint Review Panel, many more years of environmental and social impact studies of the route, even under Stephen Harper’s fast track system. The TransCanada/Petronas pipeline would also cross the traditional territory of the Gitxsan First Nation and if Enbridge tried that the company would have to deal with the fact that it signed a controversial agreement with Elmer Derrick that was immediately repudiated by most members of the Gitxsan First Nation and eventually dropped by Enbridge.
So why does this idea of a pipeline to Prince Rupert keep coming up?
In most cases, the idea of the pipeline to Prince Rupert is always proposed by Albertans, not from any credible source in British Columbia, or the suggestions come from desk bound analysts in Toronto and Ottawa both in think tanks and in the newsrooms of dying newspapers who have never seen the Skeena River apart from a tiny handful who have looked at Google Street View
(Yes you can Google Street View Highway 16 along the Skeena, I recommend it if you can’t do the drive)
Perhaps the worst example of this failure of both analysis and journalism came in the Edmonton Journal on July 7,2014, when it published a piece by Bob Russell, entitled Opinion: Make Prince Rupert the terminus, which went over the same old inaccurate arguments.
The overland route currently proposed by Enbridge is fraught with environmental issues because it goes over coastal mountains and streams before entering Kitimat’s port. This port will also be the base of perhaps as many as four liquefied natural gas terminals, which will result in the channel always busy with LNG ships outbound and returning from many Asian ports.
There are existing rights of way for the major highway, the Yellowhead, and CN Rail line from Edmonton to the Port of Prince Rupert, so this eliminates the issue of transgressing First Nations lands. The technical issues of narrow passages can be overcome with engineering. In fact, the pipeline can be buried in the roadway at some restricted locations if absolutely necessary, but two different engineers have assured me that for the most part, the right of way should be able to handle the pipeline. A vital factor, of course, is to reduce the impact by eliminating the need for two pipelines.
The clue is how the Edmonton Journal describes Russell;
Bob Russell has an extensive background in planning and was a member of the Edmonton Metro Regional Planning Commission. He has flown the Douglas Channel, visited Kitimat and toured the Port of Prince Rupert.
This is so typical of the Albertan attitude toward northwest British Columbia, people fly in for a couple of days, make a quick observation, and fly out again and present themselves as experts on the region. (Some “experts” on Kitimat, very active on Twitter have apparently never left Calgary).
It obvious that the “two engineers” who assured him “the right-of-way could handle of pipeline” have no idea what they’re talking about. As the photos show there is barely enough room for a highway and a rail line much less a 25 metre wide pipeline corridor.
If the pipeline was to be built as Russell proposed, the only highway between Prince Rupert and the rest of Canada would have to be closed for years, there are no detours. All so a pipeline can be buried under the asphalt not in solid ground, but in the fill on the side of a riverbank in an avalanche zone?
Of course, closing a highway up here won’t inconvenience anyone in Edmonton or Calgary, will it?
Would CN be happy with years of disruption of their lucrative traffic to Prince Rupert with grain and coal outbound to Asia and all those containers coming in to feed Chinese products to the North American market? (you can be sure Walmart wouldn’t be happy about that, not to mention prairie farmers including those from Alberta)
Russell’s statement
There are existing rights of way for the major highway, the Yellowhead, and CN Rail line from Edmonton to the Port of Prince Rupert, so this eliminates the issue of transgressing First Nations lands.
Is also inaccurate.
I was told by First Nations leaders during the Idle No More demonstrations in the winter of 2013, that, a century ago, when the Grand Trunk built the railway along the Skeena , they did just that, built it without consulting the First Nations along the route, sometime digging up native cemeteries and sacred spots.
While apparently CN has worked in recent years to improve relations with the First Nations along the rail line, according to those leaders some issues of right-of-way remain to be resolved.
If there were any plans to build a diluted bitumen pipeline along that route, that would likely mean another court battle adding to those already before the Federal Court, a court battle that would cost Enbridge, CN, the federal government, environmental NGOs and the First Nations more millions in lawyers’ fees.
It’s doubtful if in the long gone (and perhaps mythical) days of “get it right” journalism that the Russell opinion piece would have passed the scrutiny of an old fashioned copy editor and fact checker.
In 2012, the Edmonton Journal (in a story no longer available on their website) also cited former Alberta Premier Peter Lougheed and former Bank of Canada governor David Dodge, as also favouring Prince Rupert.
Dodge, who was in Edmonton Tuesday to deliver a speech on the global economic outlook at MacEwan University, said Enbridge’s proposed Northern Gateway pipeline to Kitimat looks like even more of a long shot.
“I think the project to Kitimat looks, objectively, more risky. So why hasn’t much greater effort gone into looking at Prince Rupert and taking (bitumen) out that way? My guess is, the easiest place to get B.C. to buy into the project would be to go to Rupert.”
Dodge’s views echo those of former Alberta Premier Peter Lougheed, who also favours looking at an alternate pipeline route to Prince Rupert, where ocean-going supertankers can navigate more easily.
Back in 2012, I finished my piece for the Huffington Post by saying:
So why do people insist, despite the evidence, that the Northern Gateway go to Prince Rupert? It’s no longer an pipeline; it’s emotion and ideology. Ideology in that opposition to the Northern Gateway is seen by conservatives as heretical opposition to free enterprise itself. Emotion among those who see promoting the oil patch as an issue of “Alberta pride” and even Canadian patriotism.
For the promoters of the pipeline to Prince Rupert, ignoring the science of geology and the study of geography across all of northwestern B.C. is no different than repeatedly knocking your head against the Paleozoic metamorphic greenstone of the mountain cliffs along the Skeena. It only gives you a headache.
Things haven’t gotten much better in the past two years. In fact they’re getting worse as opposition to pipelines mounts.
It seems that in 2014 the Alberta and the federal government policy in promoting pipelines Northern Gateway, KinderMorgan’s TransMountain, Keystone XL, Line 9 Reversal and Energy East (slick PR and smiling representatives at open houses, politicians at strictly controlled photo ops) is to ignore facts on the ground and to refuse to deal with the concerns of local people from coast to coast.
There could, perhaps, be a more inclusive and truly science-based pipeline planning process that could see pipelines go on optimum routes but that isn’t happening.
The policy for the oil patch and its politician supporters when it comes to pipelines is facts and geology don’t really matter. So they put on ruby slippers, knock their heels together three times and send pipelines down a yellow brick road to an Emerald City (while telling the locals to ignore the man behind the curtain)
The Haisla Nation’s plan for entering the LNG business is based on the idea that “it is anticipated that the Haisla Projects will be developed using a business model based on controlling two components of the value chain: land and pipeline capacity” according to its application to the National Energy Board for a natural gas export licence.
Cedar LNG Development Ltd., owned by the Haisla Nation, filed three requests for export licences with the NEB on August 28, under the names Cedar 1 LNG, Cedar 2 LNG and Cedar 3 LNG. Another name used in the application is the “Haisla Projects.”
The 25-year export licence request is standard in the LNG business; it allows export of natural gas in excess of projected North American requirements. Thus like the NEB hearings for the Kitimat LNG and LNG Canada projects it is not what is called a “facility” licence which is what Enbridge Northern Gateway requested.
The project anticipates six “jetties” that would load LNG into either barges or ships at three points along Douglas Channel, one where the present and financially troubled BC LNG/Douglas Channel Partners project would be.
A second would be beside the BC LNG project, which may refer to the Triton project proposed by Pacific Northern Gas parent company Altagas.
Both are on land now owned by the Haisla Nation in “fee simple” land ownership under Canadian law.
Map from the Haisla application to the NEB showing that the Haisla Projects Region will allow for a total of six LNG jetty sites. One of these, on DL99, is currently ear-marked to be used for a project involving a consortium (BCLNG) One will be situated on the DL309 Haisla fee simple land and the other four jetties are to be situated on the Haisla leased lands that surround the Chevron-led LNG development at Bish Cove. The map also shows that the Haisla own land at Minette Bay.
The other four would be on land surrounding the current Chevron-led Kitimat LNG project along Douglas Channel and in the mountains overlooking Bish Cove which the Haisla have leased.
Haisla Nation Chief Counsellor Ellis Ross at Bish Cove, June 19, 2013. (Robin Rowland/Northwest Coast Energy News)
The move last week and the revelation of the Haisla’s plans for the land are a cumulation of Haisla Nation Chief Counsellor Ellis Ross’s idea of restoring more of the First Nation’s traditional territory by buying or leasing the land using standard Canadian land law and at the same time getting around some of the more restrictive provisions of the Indian Act that apply to reserve land.
Just how the Haisla will go into the pipeline business is not as clear as the First Nation’s acquisition of the land. The application says:
The pipeline capacity required to transport sourced LNG to the Haisla Projects will include a mix of new and existing pipeline and infrastructure. The Haisla are in the advanced stages of negotiating and drafting definitive agreements with the major gas producers and pipeline transmission companies located in the vicinity with respect to securing pipeline capacity. It is expected that the Haisla Projects will rely on the Haisla’s business partners or customers to source gas from their own reserves and the market.
With the Haisla basing their business strategy on land and pipelines, the First Nation’s strategy is looking for flexibility in what is a volatile and uncertain market for LNG.
The application says the Haisla “are currently in advanced stage discussions and negotiations with a number of investors, gas producers, LNG purchasers, pipeline transmission companies, technology providers and shippers. As such, the particular business models have yet to be finalized. However, it is anticipated that between the various Haisla Projects, multiple export arrangements may be utilized.”
As part of the idea of flexibility, the actual LNG infrastructure will be constructed and operated with potential partners. That is why there are three separate applications so that each “application will represent a separate project with independent commercial dealings with investors, gas producers, LNG purchasers, pipeline transmission companies, technology providers and shippers.”
The Haisla say that they are “working with a number of entities to develop business structures and partnerships to provide transaction flexibility, adequate financing, modern technology, local knowledge, and marketing expertise specific to Asian targets. The separate projects will accommodate expected production and demand and will also allow for a number of midlevel organizations to be involved with the various projects as well as traditional major gas producers and LNG purchasers.”
The Haisla are working with the Norwegian Golar LNG which had been involved in the stalled BC LNG project, using a Golar LNG’s vessels and technology, using a new design that is now being built in Singapore by Keppel Shipyard.
Golar LNG uses PRICO LNG process technology developed by Black & Veatch, (Wikipedia entry) “which is reliable, flexible and offers simplified operation and reduced equipment count.”
The filing says the project will “be developed using either barge-based or converted Moss-style FLNG vessels. The terminals will consist of vessel-based liquefaction and processing facilities, vessel-based storage tanks, and facilities to support ship berthing and cargo loading”
The jetties to be used for the Haisla Projects may be either individual FLNG vessels or “double stacked”, meaning that the FLNG vessels are moored side-by-side at a single jetty. The Haisla have conducted various jetty design work and site /evaluation studies with Moffat and Nichol.
The Haisla Projects anticipate that the construction will be in 2017 to 2020, “subject to receiving all necessary permits and approvals” and is expected to continue for a term of up to twenty five years. There is one warning, “The timelines of the Haisla Projects will also depend on the contracts and relationships between the Applicant and its partners.”
The filing goes on to say:
Haisla Nation Council and its Economic Development Committee are committed to furthering economic development for the Haisla. The Haisla’s business philosophy is to advance commercially successful initiatives and to promote environmentally responsible and sustainable development, while minimizing impacts on land and water resources, partnering with First Nations and non-First Nations persons, working with joint venture business partners, and promoting and facilitating long-term development opportunities.
The Haisla Applications will allow the Haisla to be directly involved as participants in Canada’s LNG industry, rather than having only royalty or indirect interests. The Kitimat LNG and LNG Canada projects, and the associated Pacific Trails Pipeline and Coastal Gas Link Pipeline, have increased economic opportunities in the region and the Haisla are very supportive of these projects locating within the traditional territory of the Haisla. The support of the Haisla for these two projects reflects a critical evolution of the Haisla’s economic and social objectives.
Map from the Haisla Nation application to the NEB showing the proposed LNG developments in relation to Douglas Channel.Map from the Enbridge filing with the Joint Review Panel showing the same area with the proposed Northern Gateway bitumen terminal.
Earlier, another Australian newspaper, The Age reported that Woodside’s petroleum and LNG operations had “revenue of $US5.3 billion for the first nine months of 2014. Compared with the corresponding period in 2013, revenue was 28.7 per cent higher for the 2014 period.”Part of the money came from selling natural gas assets in the United States.
