BCLNG | Northwest Coast Energy News

Douglas Channel Energy signs preliminary deal for two LNG tankers

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.

Golar LNG, which describes itself on its website as “one of the world’s largest independent owners and operators of LNG carriers” said in its interim results report to shareholders on November 28:

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 is also moving into Liquified Natural Gas production vessels, that is floating ships that produce the LNG than taking it from a shore-based plant.

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.

TransCanada plans rugged over-mountain route for gas pipeline to Kitimat

Coastal GasLink map — A map from TransCanada’s Coastal GasLink showing the conceptual route of the proposed natural gas pipeline from the shale gas fields in northeastern BC through the mountains to Kitimat and the proposed Shell LNG facility. (TransCanada)

TransCanada plans a rugged over-mountain route for its proposed Coastal Gaslink pipeline to the Shell Canada liquified natural gas project in Kitimat, BC, company officials said Monday, Oct. 15, 2012, in two presentations, one to District of Kitimat Council and a second at a community town hall briefing.

The pipeline would initially carry 1.7 billion cubic feet of natural gas per day from the Montney Formation region of northeastern British Columbia along a 48 inch (1.2 metre) diameter pipe over 700 kilometres from Groundbirch, near Dawson Creek, to Kitimat, site of the proposed Shell Canada LNG Canada project.

Rick Gateman, President of Coastal GasLink Project, a wholly owned TransCanada subsidiary told council that the project is now at a “conceptual route” stage because TransCanada can’t proceed to actual planning until it has done more detailed survey work and community consultations.

At the same council meeting, documents from Shell Canada notified the District that it has formally applied to the National Energy Board for an export licence for the natural gas.

Gateman told council that since the pipeline itself will be completely within the province of British Columbia, it comes under the jurisdiction of the British Columbia Environmental Assessment process and the BC Oil and Gas Commission and that the NEB will not be involved in approving the pipeline itself.

At first, the Coastal Gas Link pipeline would be connected to the existing Nova Gas Transmission system now used (and being expanded) in northeastern British Columbia.

From Vanderhoof, BC to west of Burns Lake, the Coastal GasLink pipeline would be somewhat adjacent to existing pipelines and the route of the proposed Enbridge Northern Gateway bitumen pipeline and the proposed Pacific Trails natural gas pipeline.

Somewhat south of Houston, however, the pipeline takes a different route from the either the Northern Gateway or Pacific Trails Pipeline, going southwest, avoiding the controversial Mount Nimbus route.

Howard Backus, an engineering manager with TransCanada told council that the route changes so that Coastal GasLink can avoid “congestion” in the rugged mountain region.

Backus said that the Pacific Trails Pipeline for Apache and its partners in the Kitimat LNG project “is skirting” Nimbus while Enbridge plans to tunnel through the mountain. That tunnel is one of the most controversial aspects to the Northern Gateway project. The local environmental group Douglas Channel Watch has repeatedly warned of the dangers of avalanche and geological instability in the area where the Northern Gateway pipeline emerges from the tunnel. Enbridge has challenged Douglas Channel Watch’s conclusions in papers filed with the Northern Gateway Joint Review panel.

Under TransCanada’s conceptual route, the pipeline heads southwest and then climbs into the mountains, crossing what Backus calls “a saddle” (not a pass) near the headwaters of the Kitimat River. The pipeline then comes down paralleling Hircsh Creek, emerging close to town, crossing the Kitimat River and terminating at the old Methanex plant where Shell plans its liquified natural gas plant. (That means that if the conceptual plans go ahead, the TransCanada pipeline would climb into the mountains, while Pacific Trails finds a way around and Enbridge tunnels).

Backus told council that going north “created more issues,” but did not elaborate.

Backus assured people at the town hall that energy companies have a lot of experience in building pipelines in mountainous areas, including the Andes in South America.

Asked by a local businessman at the town hall if it was possible to build a road along the route of the pipeline, Backus said the mountain areas would be too steep. Any pipeline maintenance would have to be done by tracked vehicle, he said.

Gateman told council that the pipeline would be buried along its entire route. If Shell increases the capacity of its LNG facility in Kitimat, the Coastal Gaslink pipeline could increase to 3.4 billion cubic feet a day or perhaps even more. For the initial capacity, the company will have one compressor station at the eastern end of the line. If capacity increases or if the route requires it, there could be as many as five additional compressor stations. (TransCanada’s long term planning is based on the idea that Shell will soon be adding natural gas from the rich Horn River Formation also in northeastern BC to the Kitimat export terminal.)

TransCanada will begin its field work, including route and environmental planning and “community engagement” in 2013 and file for regulatory approval in 2014. Once the project is approved, construction would begin in 2015.

Gateman said that TransCanada is consulting landowners along the proposed right of way and “on a wide area on either side.” The company also is consulting 30 First Nations along the proposed route. Gateman told council, “We probably have the most experience of any number of companies in working directly with and engaging directly with First Nations because of our pipelines across Canada.”

(Despite Gateman’s statement, the TransCanada maps showed that the Coastal Gaslink Pipeline would cross Wet’suwet’en traditional territory and officials seemed to be unaware of the ongoing problems between Apache and the Pacific Trails Pipeline and some Wet’suwet’en Houses who oppose that pipeline).

Gateman told council that the pipeline would be designed to last at least 60 years. He said that in the final test stages, the pipeline would be pressured “beyond capacity” using water rather than natural gas to try and find if any leaks developed during construction.

He said that the company would restore land disrupted by the construction of the pipeline, but noted that it would only restore “low-level vegetation.” Trees are not permitted too close to the pipeline for safety reasons.

TransCanada made the usual promises the region has heard from other companies of jobs, opportunities for local business and wide consultations. (TransCanada may have learned lessons from the botched public relations by the Enbridge Northern Gateway. A number of Kitimat residents have told Northwest Coast Energy News that TransCanada was polling in the region in mid-summer, with callers asking many specific questions about environment and the spinoffs for communities).

Councillor Phil Germuth questioned Gateman about the differences between a natural gas pipeline and a petroleum pipeline. Gateman replied that the pipelines are pretty much the same with the exception that a natural gas pipeline uses compressor stations while a petroleum pipeline uses pumping stations. Gateman did note that the original part of the controversial Keystone XL pipeline that would carry bitumen through Alberta and US mountain states to Texas was a natural gas pipeline converted to carry the heavier hydrocarbons.

Although the natural gas projects have, so far, enjoyed wide support in northwestern British Columbia, environmental groups and First Nations have raised fears that sometime in the future, especially if there is overcapacity in natural gas lines, that some may converted to bitumen, whether or not Northern Gateway is approved and actually goes ahead.

Shell application to NEB

In a fax to District of Kitimat council, Shell Canada Senior Regulatory Specialist Scot MacKillop said that the Shell had applied to the National Energy Board on September 25, 2012 for a licence to export LNG via Kitimat for the next 25 years.

The Shell proposal, like the previous Kitimat LNG and BC LNG proposals, are export applications, unlike the Enbridge Northern Gateway which is a “facility application.”
In its letter to Shell’s lawyers, the NEB took pains to head off any objections to the project on environmental or other grounds by saying:

the Board will assess whether the LNG proposed to exported does not exceed the surplus reaming after due allowance has been made for the reasonably foreseeable requirements for use in Canada. The Board cannot consider comments that are unrelated…such as those relating to potential environmental effects of the proposed exportation and any social effects that would be directly related to those environmental effects.

Haisla, BC government sign agreement for third LNG facility at Kitimat

Updated with map, agreement details

Map of Haisla Framework Agreement — A map, released by the BC government, shows the area of Crown land covered by the Haisla Framework agreement that could lead to another LNG project in Kitimat. (Govt of BC)

The Haisla Nation and the BC government have signed an agreement that will lead to a third liquified natural gas project near Kitimat.

The “Haisla Framework Agreement” allows for the lease or sale of up to approximately 700 hectares of Crown land near the Douglas Channel, and for the foreshore lease of submerged lands of up to 102 hectares for a berthing facility.

The area is just north of the Haisla Reserve land at Bish Cove where the KM LNG project will be located, but south of the proposed BC LNG and Enbridge terminals. It is all undeveloped and unserviced land within the boundaries of the District of Kitimat.

That could mean, if all projects go ahead there the west side of Douglas Channel from Kitimat almost to Jesse Falls would see three, perhaps fourm hydrocarbon facilities and terminals.

The agreement provides the Haisla with the options for up to a 60-year lease or the possibility of purchasing of the land outright.

The agreement also commits both parties to start work on land-use planning for areas around the Douglas Channel, which, the BC government says, has tremendous potential as a marine port.

A news release from the BC government today does not specify the backer of the terminal, While the most obvious candidate could be the Shell project LNG project (last fall Shell purchased the old Methanex site and the associated marine terminal at Kitimat) there is now media speculation that there could be other players involved, possibly another giant Exxon Mobile.

A news release from the BC government says that the “framework agreement” is a “significant step toward government’s commitment to have three terminals and their connecting pipelines operating by 2020, creating more than 1,400 ongoing jobs and generating an estimated $600 billion in economic activity over 30 years.”

The release says the agreement “provides the structure for a land purchase or lease that will allow the Haisla to partner with industry to develop a liquefied natural gas (LNG) facility and marine export terminal on the west side of the Douglas Channel in the areas around Haisla Reserve #6.”

The release quotes, Ida Chong, BC Minister of Aboriginal Relations and Reconciliation as saying:

Our government is working with First Nations like the Haisla to create new jobs and opportunities throughout British Columbia. This agreement builds on our strong partnership with the Haisla Nation, and it is the key to unlocking the vast potential of a whole new natural gas export industry in British Columbia which will provide long-term stability for families and communities.

It also quotes Ellis Ross, Chief Councillor of the Haisla Nation: –

This agreement allows the Haisla to look at the land on the west side of the Douglas Channel in a different light. This gives the Haisla and associated projects the certainty needed for the LNG proposals and other projects coming forward for our territory. If we are able to do this, the Haisla people will benefit, as will all British Columbians and Canadians.

Ida Chong and Ellis Ross sign agreement — Ida Chong and Ellis Ross sign the Haisla Framework Agreement in Vancouver, Sept.14, 2012 (Govt of BC photo)

The release goes on to say that the agreement signals a closer working relationship between the Haisla and BC in and around the Kitimat and Douglas Channel area. It commits both parties to start work on land-use planning for areas around the Douglas Channel, which has tremendous potential as a marine port. This certainty will allow other development projects in the area to proceed.

The agreement says the Haisla will work independently to find a suitable partner for the development of the land. Details of the lease or sale are expected to be finalized this fall.

Spectra Energy, BG Group propose natural gas pipeline to Prince Rupert, creating fourth NW BC LNG project

Spectra Energy Corp of Houston, Texas, today announced that the company has signed a Project Development Agreement with BG Group PLC, based in the United Kingdom, to jointly develop plans for a natural gas transportation system from northeast B.C. to serve BG Group’s potential liquefied natural gas (LNG) export facility in Prince Rupert.

The BG group signed an agreement last February with the Prince Rupert Port Authority for a feasibility study to develop an LNG terminal at the port.

Spectra Energy BC project map — A map released by Spectra Energy shows the proposed pipeline project from the shale gas fields of northeastern BC to Prince Rupert (Spectra Energy)

A release from Spectra Energy and BG Groupsays each company will initially own a 50 per cent interest in the proposed transportation project. Spectra Energy will be responsible for construction and operation and BG Group has agreed to contract for all of the proposed capacity.

The approximately 850-kilometre, large diameter natural gas transportation system will begin in northeast B.C. and end at BG Group’s potential LNG export facility in Prince Rupert.

A fact sheet released by Spectra says the project would provide 50 to 60 permanent jobs on completion and about 4,000 jobs during construction.

The Spectra BG project will be the fourth using BC’s strategic position on the Great Circle Route to Asia to export liquified natural gas. TransCanada has signed a deal with Shell for a pipeline, Coastal GasLink, that would initially carry up to 1.7-billion cubic feet a day of gas to the Shell Canada project at Kitimat The Pacific Trails pipeline, could carry more than 1-billion cubic feet a day to the KM LNG partners ship where Apache, EOG and Encana are building a terminal at Bish Cove, south of Kitimat. The fourth project, BC LNG, would use either existing pipelines or share one of the proposed Kitimat pipelines to produce LNG for customers at a barge-based floating terminal at what is sometimes called North Cove, between the KM LNG project at Bish Cove and the proposed Enbridge Northern Gateway project which would be close to the Rio Tinto Alcan smelter.

The Spectra release says the new transportation system will be capable of transporting up to 4.2 billion cubic feet per day of natural gas. The project will connect with the Spectra Energy facility at Fort St. John, the centre of the still growing shale gas production and exploration in the northeastern BC.

Greg Ebel, president and chief executive officer, Spectra Energy says in the release:

We are excited to be partnering with BG Group, a recognized world leader in natural gas and more specifically, LNG. This project offers B.C. a unique opportunity to access new markets, strengthen its energy infrastructure, engage stakeholders in economic growth and job creation, and ultimately secure the province’s position as a competitive energy leader.

Furthermore, today’s announcement initiates our next wave of investment opportunity in B.C. We are ideally positioned to create further value for our investors by leveraging surplus B.C. natural gas supplies and facilitating its export to high-demand markets in Asia. This, in turn, will provide multiple opportunities for further investment in our gathering and processing facilities in the province.

Doug Bloom president of Spectra Energy Transmission West adds in the release:

For more than half a century, Spectra Energy has been a part of communities in B.C. This project will build on our expertise and track record of delivering natural gas responsibly, listening to the needs of Aboriginal and local communities, and protecting the environment, as we help deliver on B.C.’s energy potential.
Working together with affected stakeholders and based on preliminary assessments of environmental, historical, cultural and constructability factors, early conceptual routes have been developed. Spectra Energy and BG Group will continue engaging with interested and affected stakeholders, including Aboriginal and local communities, environmental organizations and regulatory agencies, to further refine the project route.

Spectra Energy Fact Box — Fact box from Spectra Energy on the proposed pipeline to Prince Rupert (Spectra)

As is now common with proposed energy projects for northwestern British Colulmbia, Spectra has set up a website for consultations Energy for BC.

Spectra says: “The new outreach initiative is designed to engage with stakeholders on the jobs, revenues and environmental benefits that natural gas can create in British Columbia.”
Spectra also makes the usual commitment to “spend the next several years closely conferring with stakeholders and working through the permitting process for the proposed transportation system.”

Spectra Energy Project Fact Sheet
PDF

What is it about Douglas Channel islands? Now a US agency has added a “Douglas Island”

US FERC Map of LNG terminals in North America — Map from the United States Federal Energy Regulatory Commission showing LNG export terminal projects in North America (FERC)

What is it about the islands in Douglas Channel? First, Enbridge gets in to a lot of hot water, so to speak, for erasing the islands in Douglas Channel in an animation promoting the Northern Gateway Pipeline. See for example The Vancouver Sun on back on Aug. 16, 2012, when it picked up a story from the Times Colonist – Enbridge map sinks islands, angers critics. The controversial video segment showed Douglas Channel wide open for navigation, rather than marked with about one thousand square kilometres of mountainous islands. This map, created by the Leadnow.ca and Sumofus.org websites was widely used by the media to show the difference. Enbridge later amended its video with a disclaimer that it is “broadly representational.” A video by Shortt and Epic Productions “This is Not An Enbridge animation” showing the beauty of northwestern BC quickly went viral.

As this was happening, the United States government Federal Energy Regulatory Commission issued a map that shows Liquified Natural Gas import and export terminals across North America, a map that adds an island to the Channel–“Douglas Island.”

In fact, the map manages to get a lot about Canadian LNG projects wrong. It locates the BC LNG project on the non-existent Douglas Island. The company’s name Douglas Channel Energy Partnership actually gives the proper location this way

south of the Moon Bay Marina, within the District of Kitimat and the asserted traditional territory of the Haisla Nation. The site is approximately 10 km southwest of Kitimat and 7 km north of Bees Cove Indian Reserve 6 (Bish Cove)

The small cove where BCLNG will put its barges to create the LNG is often locally called North Cove.

The FERC map also misplaces the Shell LNG project, now known as LNGCanada, in Prince Rupert, even though Shell confirmed the Kitimat location on May 15, 2012. It also calls it Prince Rupert Island, although the town of Prince Rupert is actually located on Kaien Island.

The map does apparently get the KM LNG project somewhat correct, attributing it to Apache Canada, but leaving off Apache’s partners, Encana and EOG.

The map recently also appeared on the website of Oregon Public Broadcasting in an article Five Keys To The Pacific Northwest’s Natural Gas Export Debate by reporter Amelia Templeton, which outlines the growing controversy over the plans to export US LNG through Coos Bay, Oregon via the Jordan Cove Project.

It appears that in Oregon, the Coos Bay LNG project is becoming as controversial as the Northern Gateway project is in Canada.

The issues outlined by Templeton include the threat of expropriation (called “eminent domain” in the US and also a key issue in the debate over the Keystone XL pipeline on the plains). There are arguments on jobs versus the environment, especially the perceived threat to wild rivers and salmon spawning grounds. Finally one issue that is lower on the agenda in northwestern BC but a big worry in Oregon, the potential for a devastating earthquake along the Cascadia fault.

During the NEB hearings on the KM LNG (Apache/EOG/Encana) project in June, 2011, many of the “expert” witnesses urged that that first Kitimat project go ahead quickly because of perceived competition from Oregon.

Unlike in Oregon, LNG projects are generally perceived positively in the northwest and all three are going ahead, although not as quickly as originally planned due to market volatility among prime potential customers in Asia.

How “On the Waterfront” could decide the fate of Enbridge’s Kitimat terminal

There’s one question about the Enbridge Northern Gateway project that many people ask and few can answer: Who is responsible for the port of Kitimat? Who would be liable should there be a disaster in the port? Nobody really knows.

Unlike many harbours in Canada, the port of Kitimat is “private,” although as the District of Kitimat says, “Transport Canada and other federal agencies continue to regulate navigation, security and environmental safety.” Kitimat has promoted that private status as an economic advantage.

If there’s a dispute, the question of responsibility and liability would probably end up in the Supreme Court of Canada, with the justices sorting out a historic puzzle. Or perhaps that historical puzzle could mean that the future of the port of Kitimat might be decided by the next B.C. provincial election.

Most of the other harbours in Canada are the responsibility of Ports Canada, a branch of Transport Canada or run by (usually not-for-profit) semi-public port corporations or local harbour commissions.

To find out why Kitimat is one of the few private ports in Canada, the first thing to do is watch Eliza Kazan and Bud Schulberg’s classic 1954 multiple Oscar winning movie, On the Waterfront, starring Marlon Brando, about how the mob ran the New York docks.

What has On the Waterfront got to do with Kitimat? It goes back to when the then Aluminum Company of Canada/Alcan (now Rio Tinto Alcan) was planning the Kitimat project; much of that work was done in New York both by employees and consultants. It was in 1949, that Malcolm Johnson, a New York Sun reporter, wrote a Pulitzer Prize winning series of investigative reports called “Crime on the Waterfront,” exposing corruption and Mafia involvement with the docks and the longshoremans’ union. The movie was based, in part, on that investigative series.

So in its planning, Alcan was determined that the longshore unions would not be involved in running the docks in Kitimat. The publicly stated reason has always been that Alcan wanted a seamless 24/7 operation that would be integrated with the aluminum smelter. Alcan would sign a collective agreement with the United Steelworkers that covered both the smelter and the docks. (CAW 2301 now represents most of the workers at the Kitimat smelter.)

When the Kitimat project was being finalized in 1949 and 1950 at the height of the Cold War, aluminum was a strategic commodity, security was high on the agenda, and it was not just the Soviet bloc but the mob as well that worried the authorities.

Add two factors. First, in 1949 the province of British Columbia was anxious to promote what would today be called a “mega-project.” Second, in the post-war era when corporations were relatively enlightened compared to today, Alcan was determined not to create the traditional “company town.”

To promote private-sector development of both hydro-electricity and aluminum, B.C. signed a rather loosely worded agreement with Alcan, noting that the project was going on “without investment by or risk to the government.” That agreement was implemented by the Legislative Assembly of B.C. by an equally wide open Industrial Development Act. One aim of both was try to ensure that future “socialists” would not expropriate the project.

Industrial township

With the province handing over the Crown land at the head of Douglas Channel at a very nominal price to Alcan, next came the creation of the District of Kitimat. With the town under construction, with few buildings and a small population, under normal B.C. practice, the area would be “unincorporated” and would not have a municipal government. But Alcan and the province came up with a new concept, which they called “an industrial township,” which would allow a municipal government to be established in anticipation of future growth.

The act that established the District of Kitimat put the boundaries outside the land owned by Alcan (excluding land reserved for the Haisla Nation).

Alcan began selling off the land in the planned areas of the town and other land it didn’t need. Individuals bought houses and businesses bought the land for their own use. Alcan retained ownership of the harbour and estuary lands and the small “Hospital Beach.”

The District of Kitimat has some legal responsibility for “wharfs” at the port of Kitimat. At council meetings, the environmental group, Douglas Channel Watch, has raised the question of the district’s responsibility and liability in case of an Enbridge incident but there’s been no definitive response from district staff. There is no municipal harbour commission as there is in other jurisdictions.

Up until recently, it was a convenient arrangement for everyone involved. Alcan, Eurocan and Methanex ran their dock operations without any interference, beyond standard Transport Canada oversight.

Things began to change in 2007, when the Rio Tinto Group bought Alcan, creating Rio Tinto Alcan. A couple of years ago, a senior staff source in the Canadian Auto Workers explained it to me it this way. “Alcan was a big corporation, but Alcan was a corporation with a big stake in Canada. As a union, we could do business with them. Rio Tinto is a transnational corporation with businesses in lots of countries but no stake in any of them. So it’s a lot harder now.”

With the Rio Tinto acquisition of Alcan, things tightened up in Kitimat. Negotiations between the District and RTA for the District to obtain more land stalled. Access to the estuary and other RTA lands that had been somewhat open under Alcan became more restrictive. In 2010, the Eurocan paper mill shut down along with its dock. In 2011, Rio Tinto bought the dock from West Fraser, owner of Eurocan. The Kitimat community noted that when the dock was repainted, it said just “Rio Tinto.” not “Rio Tinto Alcan” and that led to lots of gossip and wondering about what the Rio Tinto Group really plans for Kitimat. Last fall, Shell Canada purchased the former Methanex dock for part of its liquified natural gas operations.

With the Enbridge Northern Gateway project, the BC LNG project at North Cove and the KM LNG project at Bish Cove all along the shore of Douglas Channel and within the boundaries of the District of Kitimat which extends as far south as Jesse Lake, the question that has to be asked is, what happens now? If the Enbridge project is built, it will start just beyond the boundaries of the land owned by Rio Tinto Alcan.

That old arrangement between Alcan and the District of Kitimat is facing many new challenges.

The district once had a harbour master, but the position was eliminated because he had nothing to do. Alcan owned its docks, Alcan managed the docks and Alcan union employees worked on the docks. Later came the Eurocan (now owned by Rio Tinto) and Methanex (now owned by Shell) docks, again owned and operated by private corporations.

The District of Kitimat, nominally in charge, was content to sit back and collect taxes.

With the Enbridge Northern Gateway project, the B.C. LNG project at North Cove and the KM LNG project at Bish Cove all along the shore of Douglas Channel and within the boundaries of the District of Kitimat, the question that has to be asked is, what happens now? If the Enbridge project is built, it will start just beyond the boundaries of the land owned by Rio Tinto Alcan.

In Canada, ports and harbours are normally under federal jurisdiction and Transport Canada has oversight. But Alcan’s “private port” and the District of Kitimat were created by acts passed by the B.C. government.

The original agreement between the province and Alcan mentions an “aluminum plant” and “low-cost electrical power,” it doesn’t mention bitumen or liquified natural gas. Those provincial acts do not cover bitumen, supertankers and liquified natural gas.

B.C. Opposition Leader Adrian Dix has made it clear that his New Democratic Party opposes the Northern Gateway project. The federal government has said the province can’t really do anything to stop Enbridge Northern Gateway once Stephen Harper has decided that the pipeline project is in the national interest.

At this moment, Dix is a “contender” for the premiership, with Christy Clark and the B.C. Liberals dropping in the polls and with key members of her government deciding not to run in the election next spring.

So, if, as expected, Adrian Dix becomes the next B.C. premier, he has one very strong hand to play. Any act can, with proper legal advice, be amended by the B.C. legislature. That means the “socialists” so feared by Alcan and the premier of the day, Byron “Boss” Johnson, could alter the 1949 law. That in turn may upset the decades-old arrangement that created the private port which Enbridge is banking on.

Haisla Nation confirms it opposes Northern Gateway, demands Ottawa veto Enbridge pipeline; First Nation also outlines “minimum conditions” if Ottawa approves the project

The Haisla Nation has confirmed in a filing with the Northern Gateway Joint Review Panel that it opposes the Enbridge Northern Gateway project.

The document, filed June 29, 2012, is one of the most significant filed with the JRP during all the years of the debate over the controversial Northern Gateway, setting out a three stage process that will govern, whether Enbridge or the federal government like it or not, the future of the Northern Gateway pipeline project.

First, the Haisla Nation affirms that it opposes the Northern Gateway project

Second, the Haisla Nation is demanding that the federal government, in recognition of aboriginal rights and title, reject the Northern Gateway project on Haisla traditional territory.

Third, probably anticipating that Stephen Harper and his government will attempt to force the Northern Gateway on British Columbia, the Haisla are demanding meaningful consultation and set out a stringent set of minimum conditions for the project on Haisla traditional territory.

The Haisla Nation’s lawyers filed the document today late today, June 29, in response to a series of questions posed to the First Nation by Enbridge through the Joint Review process.

The Haisla also say that there already projects that are better suited to their traditional territory, the liquified natural gas projects.

The Haisla position that Ottawa must reject the pipeline if First Nations oppose it is the opening round in the constitutional battle over not just the pipeline, but entire question of aboriginal rights and title. So far the government of Stephen Harper has said that First Nations do not have a “veto” on the pipeline and terminal project.

The Haisla also refuse to answer questions that Enbridge posed on the liquified natural gas projects because the filing argues, the questions are beyond the scope of the current Joint Review inquiry.

Detailed excerpts

Haisla outline where they believe Enbridge Gateway plans are inadequate

Haisla outline conditions, concerns for Northern Gateway project

Why the Haisla oppose Northern Gateway

In the filing with the Joint Review panel, the Haisla outline nine reasons for opposition to the Northern Gateway project:

1. Northern Gateway is proposing to site its project in a location that places at risk the ecological integrity of a large portion and significant aspects of Haisla Nation Territory and resources.

2. All three aspects of the proposed project – the pipelines, the marine terminal and tankers – have the potential to impact Haisla Nation lands, waters and resources.

3. Northern Gateway has neither conducted sufficient due diligence nor provided sufficient information with respect to the assessment of a number of critical aspects of the proposed project, including but not limited to project design, impacts, risks, accidents and malfunctions, spill response, potential spill consequences and the extent, degree and duration of any significant adverse environmental effects.

4. There are significant risks of spills of diluted bitumen, synthetic crude, and condensate from corrosion, landslide hazards, seismic events along the pipeline route and at the terminal site; as well asloss of cargo or service fuels from tanker accidents, with no realistic plan provided for spill containment, cleanup, habitat restoration or regeneration of species dependent on the affected habitat.

5. Diluted bitumen, synthetic crude and condensate are all highly toxic to the environment and living systems and the consequences and effects of a spill could be devastating on the resources that support the Haisla Nation way of life, and would therefore have significant adverse effects on Haisla Nation culture and cultural heritage and aboriginal rights.

6. Risk assessments and technology have not overcome the potential for human error, wherein it is well established that 80% of oil tanker accidents that cause oil spills at sea are a result of human errors: badly handled manoeuvres, neglected maintenance, insufficient checking of systems, lack of communication between crew members, fatigue, or an inadequate response to a minor incident
causing it to escalate into a major accident often resulting in groundings and collisions (http://www.black-tides.com/uk/source/oil-tanker-accidents/causes-accidents.php). It has also become increasingly obvious that maintenance of pipeline integrity and the remote detection of pipeline ruptures is inadequate as exemplified by major environmental damage from recent pipeline ruptures in Michigan and Alberta.

7. The proposed project requires the alienation of Haisla Nation aboriginal title land, and the federal government has refused to engage in consultation with the Haisla Nation about the potential impacts of the proposed project on Haisla Nation aboriginal rights, including aboriginal title.

8. The proposed project would require the use of Haisla Nation aboriginal title land for a purpose that is inconsistent with Haisla Nation stewardship principles and with the Haisla Nation’s own aspirations for this land.

9. For the reasons set out above, the proposed project would constitute an unjustified infringement of Haisla Nation aboriginal title and rights. It would therefore be illegal for the Crown to authorize the project.

Canada is obliged to decline approval of the project

Up until now, the federal government has refused to engage First Nations in the northwestern region over the issue of the Northern Gateway pipeline and terminal, saying that the constitutionally mandated consultation will take place after the Joint Review Panel has released its report. However, the government’s Bill C-38, which gives the federal cabinet (actually the prime minister) the power to decide the pipeline means that the JRP report will be less significant than it would have been before the Conservatives gained a majority government in May, 2010.

The Haisla say the nation has “repeatedly requested early engagement by federal government decision-makers to develop, together with the Haisla Nation, a meaningful process for consultation and accommodation in relation to the proposed project.”

The filing says JRP and “the federal government’s ‘Aboriginal Consultation Framework’ have been imposed on the Haisla Nation and other First Nations, with significant aspects of the concerns expressed by the Haisla Nation about this approach being ignored.”

The Haisla says it “continues to seek a commitment from the federal government to the joint development of a meaningful process to assess the proposed project and its potential impacts on Haisla Nation aboriginal rights, including aboriginal title.”

Later in the filing the Haisla say:

The Haisla Nation has… repeatedly asked federal decision-makers to commit to the joint development of a meaningful consultation process with the Haisla Nation. The federal Crown decision-makers have made it very clear that they have no intention of meeting with the Haisla Nation until the Joint Review Panel’s review of the proposed project is complete…

The federal Crown has failed to provide any clarity, however, about what procedural aspects of consultation it has delegated to Northern Gateway. Northern Gateway has not consulted with the Haisla Nation and has not advised the Haisla Nation that Canada has delegated any aspects of the consultation process.

The Haisla then go on to say:

Canada is legally required to work with the Haisla Nation to develop and follow such a process. If the process establishes that the approval of the proposed project would constitute an unjustified infringement of Haisla Nation aboriginal rights or aboriginal title, then Canada would be legally obliged to decline approval.

Deficiencies and Conditions

Enbridge asked the Haisla that if there are conditions of approval that would nonetheless
address, in whole or in part, the Nation’s concerns; and then asked for details “on the nature of any conditions that the Haisla Nation would suggest be imposed on the Project, should it be approved.”

The Haisla reply that because there are “significant deficiencies in the evidence provided by Northern Gateway to date.” The nation goes on to say that “the acknowledged risks that have not been adequately addressed in the proposed project.” The Haisla Nation then says it “does not foresee any conditions that could be attached to the project as currently conceived and presented that would eliminate the Haisla Nation’s concerns.”

The Haisla then repeat that Enbridge has not provided sufficient information so that

it is difficult for the Haisla Nation to identify conditions to attach to the proposed project as it is still trying to fully understand the potential impacts of the project and the proposed mitigation. This is primarily because there is insufficient information provided by Northern Gateway in its application material.

Although we have attempted to elicit additional information through the JRP’s information request process, Northern Gateway has not provide adequate and complete answers to the questions posed.

The Haisla then anticipate that Stephen Harper will force the pipeline and terminal on British Columbia and say:

Nevertheless, if the project were to be approved AFTER the Crown meaningfully
consulted and accommodated the Haisla Nation with respect to the impacts of
the proposed project on its aboriginal title and rights, and if that consultation were
meaningful yet did not result in changes to the proposed project, the following
conditions would, at a minimum, have to be attached to the project.

The emphasis of the word “after” is in the original document.

The document that then goes on to present an extensive list of list of conditions the Haisla believe should be imposed on the Enbridge Northern Gateway if the project goes ahead.

The conditions include comprehensive monitoring of water quality, fisheries, wildlife and birds, vegetation throughout the Kitimat River watershed, Kitimat Arm and Douglas Channel; development of comprehensive spill response capability throughout the Kitimat River Valley, Kitmat Arm and Douglas Channel.

The Haisla also want soil and erosion control plans; water management plans; control and storage plans for fuels, lubricants and other potential contaminants; detailed plans for equipment deployment and habitat reclamation of disturbed or cleared areas.

The Haisla also want much more detailed studies before any construction, including analysis of terrain stability and slide potential throughout the pipeline corridor and at the storage tank and terminal site; engineering designs to mitigate seismic risk and local weather extremes; development of pipeline integrity specifications and procedures including best practices for leak detection; storage tank integrity specifications, maintenance and monitoring; assessment of spill containment, spill response and spill capacity requirements throughout the Kitimat River watershed, Kitimat Arm and Douglas Channel.

On tankers the Haisla want more details beyond the plans already filed by Enbridge including
detailed tanker specifications, detailed tanker and tug traffic management procedures; detailed port management specifications and procedures including operating limits for tanker operation, movement and docking.

The Haisla are also demanding “on going consultation” on all issues involved by the National Energy Board prior to any decision on any changes to or sign off on conditions and commitments to any certificate that is issued.

The Haisla want an independent third party be part of a committee to oversee the construction proecess to monitor certificate compliance during construction of the marine terminal and the pipeline.

Once the pipeline and terminal operational, the Haisla want conditions imposed on the project that include ongoing monitoring of the terrain along the pipeline, a system that would automatically shut down the pipeline shutdown whenever a leak detection alarm occurs.

The Hasila want conditions “on the disposal of any contamination that must be removed as
a result of an accident or malfunction resulting in a spill that will minimize additional habitat destruction and maximize the potential for regeneration of habitat and resources damaged by the spill.”

As well as more detailed parameters for the tankers, tugs, and pilotage procedures, the Haisla want approval of any future changes in those procedures.

The Haisla are also concerned about the “alienation” of a large area of their traditional territory by the construction of the Northern Gateway project as well as the “additional infrastructure” required by adequate spill response capability and spill response equipment cache sites.

The Haisla say “all of the land alienations required for the proposed project would profoundly
infringe Haisla Nation aboriginal title which is, in effect, a constitutionally protected ownership right” and goes on to say “proposed project would use Haisla Nation aboriginal title land in a way that is inconsistent with Haisla Nation stewardship of its lands, waters and resources and with the Haisla Nation’s own aspirations for the use of this land.”

The Haisla filing then goes on to say:

Since aboriginal title is a constitutionally protected right to use the aboriginal title land for the purposes the Haisla Nation sees fit, this adverse use would fundamentally infringe the aboriginal title of the Haisla Nation.

The report also expresses concerns about the ongoing socio-economic affects of such a large project.

It concludes by saying:

These issues are important. They go to the very heart of Haisla Nation culture.
They go to the Haisla Nation relationship with the lands, waters, and resources of
its Territory. A major spill from the pipeline at the marine terminal or from a
tanker threatens to sever us from or damage our lifestyle built on harvesting and
gathering seafood and resources throughout our Territory.

Northern Gateway proposes a pipeline across numerous tributaries to the Kitimat
River. A spill into these watercourses is likely to eventually occur. The evidence
before the Panel shows that pipeline leaks or spills occur with depressing
regularity.

One of Enbridge’s own experiences, when it dumped 3,785,400 liters of diluted
bitumen into the Kalamazoo River, shows that the concern of a spill is real and
not hypothetical. A thorough understanding of this incident is critical to the
current environmental assessment since diluted bitumen is what Northern
Gateway proposes to transport. However, nothing was provided in the application
materials to address the scope of impact, the level of effort required for cleanup
and the prolonged effort required to restore the river. An analysis of this incident
would provide a basis for determining what should be in place to maintain
pipeline integrity as well as what should be in place locally to respond to any spill.

The Kalamazoo spill was aggravated by an inability to detect the spill, by an
inability to respond quickly and effectively, and by an inability to predict the fate
of the diluted bitumen in the environment. As a result, the Kalamazoo River has
suffered significant environmental damage. The long-term cumulative
environmental damage from this spill is yet to be determined.

Looking to the future, the Haisla are also asking for a plan for the eventual decommissioning of the project, pointing out that “ Northern Gateway has not provided information on decommissioning that is
detailed enough to allow the Haisla Nation to set out all its concerns about the
potential impacts from decommissioning at this point in time.”

Haisla leaders have already expressed concern about the legacy of the Eurocan paper plant. Now it tells Enbridge

This is not good enough. The Haisla Nation needs to know how Northern Gateway proposes to undertake decommissioning, what the impacts will be, and that there will be financial security in place to ensure this is done properly.

Asserts aboriginal title

The section of the report concludes by saying:

The Haisla Nation asserts aboriginal title to its Territory. Since the essence of
aboriginal title is the right of the aboriginal title holder to use land according to its
own discretion, Haisla Nation aboriginal title entails a constitutionally protected
ability of the Haisla Nation to make decisions concerning land and resource use
within Haisla Nation Territory. Any government decision concerning lands,
waters, and resource use within Haisla Nation Territory that conflicts with a
Haisla lands, waters or resources use decision is only valid to the extent that the
government can justify this infringement of Haisla Nation aboriginal title.

The Supreme Court of Canada has established that infringements of aboriginal
title can only be justified if there has been, in the case of relatively minor
infringements, consultation with the First Nation. Most infringements will require
something much deeper than consultation if the infringement is to be justified.
The Supreme Court has noted that in certain circumstances the consent of the
aboriginal nation may be required. Further, compensation will ordinarily be
required if an infringement of aboriginal title is to be justified [Delgamuukw].

The Haisla then go on to say that the preferred use of the land in question is for the liquified natural gas projects:

The Haisla Nation has a chosen use for the proposed terminal site. This land
was selected in the Haisla Nation’s treaty land offer submitted to British Columbia
and Canada in 2005, as part of the BC Treaty Negotiation process, as lands
earmarked for Haisla Nation economic development.

The Haisla Nation has had discussions with the provincial Crown seeking to
acquire these lands for economic development purposes for a liquefied natural
gas project. The Haisla Nation has had discussions with potential partners about
locating a liquefied natural gas facility on the site that Northern Gateway
proposes to acquire for the marine terminal. The Haisla Nation sees these lands
as appropriate for a liquefied natural gas project as such a project is not nearly
as detrimental to the environment as a diluted bitumen export project.

Northwest Coast Energy News is attempting to contact Enbridge Northern Gateway for comment on the Haisla filing. Response may be delayed by the Canada Day holiday.

Haisla Nation Response to NGP Information Request (pdf)

Shell, partners, plan giant liquified natural gas project at Kitimat, mayor sees town growing to 15,000 residents

Shell Canada has confirmed that, with three partners, it is developing a giant proposed liquified natural gas export facility at Kitimat.

The project could see up to 12 million tonnes of LNG exported from Kitimat each year. What the companies are now calling LNG Canada would be built in two “trains” or stages, with each producing six million tonnes. A news release from Shell says there is an option to expand the project beyond the 12 million tonne capacity.

The announcement made international news. The Chicago Tribune said Tuesday. “Kitimat… looks set to become a major supply hub for the Pacific Rim.”

Shell’s partners, Korea Gas Corporation, Mitsubishi Corporation, and PetroChina Company Limited will work to export natural gas, mostly from northeastern British Columbia, combining the “four companies’ extensive development experience, technical depth, financial strength and access to markets required to be the leading LNG developer in Canada.”

The four companies did not say how much money is involved in the project. Reports in the Japanese media said the project could cost as much as $12 billion US.

Shell holds a 40 per cent working interest. The partners KOGAS, Mitsubishi and PetroChina each hold a 20 per cent working interest.

“Our combined expertise, and our focus on technological innovation in delivering safe and environmentally sound LNG projects around the globe, ensures that our LNG Canada project would be well-suited to deliver long-term value for British Columbia and increase access to new export markets for Canada,” says Jose-Alberto Lima, Vice President LNG Americas, Shell Energy Resources Company in a news release.

News releases from both Shell and Petrochina both say:

The proposed LNG Canada project includes the design, construction and operation of a gas liquefaction plant and facilities for the storage and export of liquefied natural gas (LNG), including marine off-loading facilities and shipping. LNG Canada can create significant economic benefit for the province, First Nations, local communities and the region. Such a project can create thousands of jobs during construction and hundreds of full-time, permanent jobs during operations. Such a significant energy project can also bring indirect economic development opportunities to the region.

Shell and PetroChina say:

A decision to move this project into development would be taken after conducting necessary engineering, environmental and stakeholder engagement work with start up around the end of the decade, pending regulatory approvals and investment decisions.
The approval process will begin with a formal consultation process with First Nations and local community residents.

“This project will contribute to a further strengthening of trade relationships between China and Canada and will help China use clean burning natural gas to fuel its economic growth,” Bo Qiliang, Vice President, PetroChina, said in the release.

“We are sitting on the doorstep of a very fast-growing market that actually wants to come to Canada because they see it as long-term stability and a secure source of supply,” Shell Canada president Lorraine Mitchelmore said. “We are now, for the first time in the natural gas industry, very competitive with other countries like Australia.”

Kitimat Mayor Joanne Monaghan said her and the District Council have been working on the project for sometime. “Council have been aware of it and have rolled up their sleeves for almost a year and half to two years,” the mayor said.

Kitimat mayor Joanne Monagahn reads notes on the LNG Canada announcement, May 15, 2012. (Robin Rowland/Northwest Coast Energy News)

One aspect was making sure Kitimat is ready for the project, Monaghan said: “We had to make sure there were hospital facilities, rental facilities, that we had housing available. We were getting all our inventories together. Now we know and now we can go full blast ahead.”

Monaghan hopes that eventually Kitimat will return its population peak of between 10,000 and 15,000 residents. (Since the closure of the Eurocan craft paper mill in 2010, Kitimat’s population dropped to around 8,000 but that number has been growing with the LNG projects and the Rio Tinto Alcan Kitimat Modernization Project, even though the KMP project will eventually mean fewer jobs at the aluminum smelter).

“If they have the five to seven thousand construction workers they’re looking for, they will bring in workers from all over BC, probably all over Canada,” Monaghan said.

Shell purchased the former Methanex plant site and the related Kitimat port terminal last fall, raising worldwide speculation about the LNG project. The Methanex site is now used by Cenovus to transport bitumen condensate by rail from Kitimat to the Alberta oil sands. Much of the old Methanex plant has been decommissioned and is being shipped to a buyer in China.

Most of the natural gas supply will come from the booming Horn River and Montney shale gas formations in northeastern British Columbia.

Reports say that LNG Canada will work with a third party that would build and probably own a pipeline from the northeast to the coat.

The profit picture comes from the fact that LNG prices in Asia, based on a proportion of the world price of oil, are much higher than the price of natural gas in North America, where the shale gas boom has driven gas prices to a record low.

The price boom in Asia could be a windfall for British Columbia, which could receive up to $600 billion in natural gas royalties over the next 25 years.

There is also fierce international competition to send LNG to Asia. The major energy companies are investing heavily in projects in Australia, while traditional suppliers like Qatar and Russia are ramping up their marketing efforts to Asia.

The old Methanex site in Kitimat — The decommissioned Methanex site by the Kitimat River, now owned by Shell. (Robin Rowland/Northwest Coast Energy News)

As of this week, Japan began closing down the last of its nuclear electrical generation capacity. After the March 11, 2011 earthquake, that country became a major customer for current and future liquified natural gas projects.

Since the earthquake last year, two other projects in Kitimat have proceeded. The Kitimat LNG project, a partnership called KM LNG led by Apache Corporation, Encana Corp, and EOG Resources plan to start up a Kitimat LNG plant in 2015, at Bish Cove with an initial capacity of five million tonnes a year. That project has been approved by the National Energy Board but is still waiting for a final go ahead from the boards of the three corporations, expected now in the fourth quarter of 2012.

A second project, called BC LNG, owned by the Haisla Nation in partnership with Houston-based LNG Partners, will act as broker and exporter for other LNG companies, facilitating exports to Asia from a barge based facility at North Cove, with the first shipment expected in 2014 or 2015.

There are also reports that Malaysia’s Petronas in partnership with Calgary-based Progress Energy Resources Corp., which have major stakes in B.C. shale are also looking for a possible LNG terminal on the west coast. As well, Talisman Energy, Nexen and Imperial Oil are also looking at west coast projects.

Related Links

News release from BC Premier Christy Clark Premier Applauds Progress on Kitimat Project: LNG Canada

Mitsubishi news release

Reports say Shell near deal for Kitimat LNG project, as Oliver approves the BC LNG

The Minister of Natural Resources, Joe Oliver, has confirmed the approval of the 20 year export licence for the BC LNG Export Cooperative. The National Energy Board had approved the licence in February.

Earlier the government had also approved the export for the KM LNG project.

In a statement, Oliver said, “This export licence is another example of our Government’s commitment to diversifying our energy export markets and strengthening our trading partnership with Asia. Canada is a safe, responsible, and reliable supplier of energy contributing to global energy security.”

“Canada is well positioned to grow as a global energy superpower. Projects such as this will show the world that we are serious about getting our energy resources to market.”

The liquefied natural gas facility would be located on the west bank of the Douglas Channel at small cove near Kitimat. BC LNG Export Co-operative intends to ship up to 1.8 million tonnes of liquefied natural gas annually to markets in Asia.

Natural gas would be transported to the proposed Douglas Channel terminal on the existing Pacific Northern Gas Pipeline and potentially on the proposed Pacific Trail Pipeline. The proposed liquefied natural gas facility is undergoing an environmental assessment in accordance with the Canadian Environmental Assessment Act. The initial phase of the facility is expected to be in operation by late 2013 or early 2014 and, if it proceeds, would represent the very first liquefied natural gas exports from Canada.

Meanwhile, Reuters quoting the Japanese Nikkei, reported that Royal Dutch Shell together with Mitsubishi Corp, China National Petroleum Corp and Korea Gas Corp are in the final stages of negotiations to build a US$12.35-billion liquefied natural gas (LNG) terminal at Kitimat.
The companies will ship gas from their Canadian fields for the project and expect to begin production around 2020 at an annual rate of 12 million tons, Nikkei reported.

Nikkei said a broad agreement is expected as early as this month, after which the four companies will start seeking approval for the project.

Shell brought the old Methanex site and marine terminal in Kitimat last fall.

Alberta Oil magazine describes Kitimat LNG projects as high stakes poker

It looks like the Chinese curse (and journalist’s blessing) “May you live in interesting times,” has come to Kitimat, especially when it comes to selling LNG to Asia.

In the past months the world liquified natural gas market has become more volatile with increased competition across the globe and, in some cases, political factors adding to the molecule mix.

In the past few days, Alberta Oil magazine has published a series of articles on the Kitimat LNG projects, describing the projects as a high stakes poker game.

The point is that the potential Asian buyers for BC (and US) liquified natural gas want a secure supply and they’re not sure what is going on on this side of the Pacific.

That’s apparently why the first project, KM LNG, has put off the final go ahead project from the first quarter of 2012, as originally expected, to the now likely the fourth quarter of 2012.

That has left a lot of uncertainty in town, despite assurances from two of the KM LNG partners, Apache Corporation and EOG Resources that they are optimistic that there will be a deal with Asian gas buyers, even if it means Asian equity in the KM LNG project.

That uncertainty in Kitimat has led to widespread rumours, none substantiated, that the three proposed projects, by KM LNG, by the Houston-Haisla BC LNG partnership and Shell, may be consolidated in one way or another.

At Kitimat council on Monday, April 2, Mayor Joanne Monaghan said “There has been a rumour around recently that Apache is stopping their working for a year and I talked to the CEO, Tim Wall, yesterday and he assured me that that was not true.”

Work is continuing on the KM LNG site at Bish Cove.

This morning, April 5, 2012, Alberta Oil reported that EOG Resources boss still bullish on Kitimat LNG, quoting a company called Bernstein Research that met with EOG’s top executive, CEO Mark Papa, who told Bernstein that EOG considers its 30 per cent holding in KM LNG as a “core holding.”

In a Thursday research note, Bernstein’s Bob Brackett says EOG is willing to sell some of its stake in the Kitimat project to a buyer (likely of the Asian persuasion) looking for equity in the upstream portion of project. “EOG expects to dilute a portion of its stake for that purpose,” Brackett writes.

A day earlier, Alberta Oil reported in Global LNG players jockey for space on a crowded field noting that Australia’s LNG megaprojects are facing competition from North America and cost inflation as the number of projects increase. At the same, US LNG projects are trapped in the current mire of US politics, with many politicians wary of the energy-starved US exporting natural gas.

In Apache Canada makes global push amid fierce competition, the article that uses the poker analogy, the magazine quotes Asish Mohanty, senior research analyst, global LNG, with Wood Mackenzie

Kitimat is due to start pumping out five million tonnes of LNG by 2015, widely viewed as a market “sweet spot” because it beats a number of major Australian projects – among them Shell’s massive Prelude endeavor – into production. “It’s a bit of a race,” Mohanty at Wood Mackenzie says. “The general impression in the industry is that before these Australasian projects start up it’s going to be a sellers’ market.”

Mohanty also looks at the problem of cost inflation and limited resources, a problem Kitimat already faces with not only the three proposed LNG projects but RTA’s Kitimat Modernization Project.

Companies that specialize in engineering, procurement and construction of liquefaction facilities number fewer than 10 internationally, Mohanty says. He expects many of them will be kept busy by construction of several LNG projects underway in northwest Australia, including ongoing work at the massive Gorgon plant at Barrow Island. The Chevron-led venture is due to begin pumping out 15 million tonnes of LNG annually by 2014-15. “All of these are massive projects,” the analyst says. “What that means is order books are pretty full. There is a scarcity of resources in places like Australia right now.”

The shortfall could potentially squeeze Canadian LNG forays. “The fact that most of the B.C. facilities are going to be ‘green-field’ will not make it easy for them to meet a timeline compared to a lot of others.”

Related CBC News Mackenzie Valley pipeline funding reduced