Shell’s LNG terminal plans “substantially larger” than rivals: Globe and Mail

The Globe and Mail reports Shell eyes LNG terminal in B.C. that would overshadow Kitimat

A group of major international energy partners led by Royal Dutch Shell PLC is contemplating an LNG export terminal for the British Columbia coast that is substantially larger than a rival’s project that could soon begin construction.

Shell, which has teamed with Korea Gas Corp., China National Petroleum Co. and Mitsubishi Corp., is looking to load 1.8 billion cubic feet a day of natural gas onto tankers bound for Asian markets, officials with Spectra Energy Corp. ) revealed Tuesday.

The Globe and Mail says Spectra spokesman Peter Murchland said Shell project would generate 1.8 billion cubic feet of natural gas a day, That compares to the 1.4-billion cubic feet a day proposed by Kitimat LNG,

Shell confirms purchase of Methanex site, marine terminal, in Kitimat for LNG project

Energy

600-methanexsite.jpgThe former Methanex site is seen the red square in this map of the Kitimat service centre prepared by Enbridge as part of its Northern Gateway  pipeline proposal and filed with the Joint Review panel. The yellow line is the proposed Enbridge bitumen pipeline. The dark red line  is the proposed pipeline that would feed the Kitimat LNG and likely the BC LNG projects, where the red pipeline route has white, that is the Pacific Trails Pipeline.  See How Kitimat harbour will look if both Northern Gateway and KM LNG go ahead.

Updated Oct. 20, 2011, 0955

Kitimat mayor Joanne Monaghan has confirmed that Royal Dutch Shell has purchased the former Methanex site in  town, “as a first step toward a proposed Liquified Natural Gas facility in Kitimat.”

Monaghan said she met with Shell executives on  Wednesday afternoon, when the long rumoured purchase of the Methanex site was confirmed.

Thursday morning, Shell spokesman Stephen Doolan  said that the company and its partners
also acquired the Kitimat Marine Terminal. Shell’s partners include Korea Gas Corp, Mitsubishi Corp and China National Petroleum Corp, Doolan said.

Both sites were owned by Cenovus Energy which purchased them in 2010  from Methanex  for a reported $40 million.

Monaghan also said that the Shell officials said the company will not be making an announcement of the details of their plans for another few weeks.

If the Shell project goes ahead, it will be the third liquified natural gas project in Kitimat.
The others are KM LNG partners’  (Apache, Encana and EOG) Kitimat LNG plant at Bish Cove and the smaller project from BC LNG.

The Methanex plant on the Kitimat river  permanently ceased methanol production November 1, 2005.  Methanex currently uses the Cenovus terminal in Kitimat to import
methanol to supply customers in western Canada. Cenovus uses the terminal and site to process condensate, used to dilute bitumen, that arrives by ocean tanker and then is shipped by rail to Alberta.

The future of condensate operation has been in doubt since the announcement of  the Enbridge  Northern Gateway project, since it was expected that the Cenovus condensate  operation would have been absorbed into the Enbridge operation. 

If the Methanex/Cenovus site is converted to a full LNG facility, current operations will have to be decommissioned first, Monaghan said.

Multiple sources in Kitimat have been saying for the past month that Shell had purchased the Methanex site, but official conformation only came from the mayor late Wednesday.

Analysis: The NEB and LNG, The environment if necessary, but not necessarily the environment

Analysis

If there are any doubts about the confusing nature of National Energy Board hearings,  at least for the public, as opposed to energy lawyers, that can be found in the decision relating to the application for the KM LNG limited partnership to export natural gas.  The NEB granted a licence that will allow the partners, Apache, Encana and EOG to export natural gas to Asia for the next 20 years.

One of the questions at the hearings, with many people in the northwest also worried about the upcoming Joint Review Panel hearings on the proposed Enbridge Northern  Gateway pipeline, was what about the environmental effects  of the natural gas pipeline​?

It all depends on the legal terms “necessary connection.”

During the briefings in Kitimat months before the actual June hearings, NEB officials said that the environmental implications of the natural gas project would not be part of the consideration because the board’s mandate in this case was whether or not to grant the export licence.  The NEB officials said that since the Kitimat LNG project was almost entirely within the province of British Columbia, the environment was the responsibility of the province, not the board nor the federal government.

At the LNG hearings, lawyers for the energy companies made similar arguments, as the NEB decision relates, saying  that KM LNG’s lawyers maintained that there was no “necessary connection” between the pipeline and the environment and so “noted that the Board is no longer required to conduct environmental assessment for gas export licence applications because those applications, unlike certain facilities applications do not trigger an environmental assessment under the CEA [Canadian Environmental Assessment ] Act and the only environmental side effects, if any, the board could consider would be those not already studied by the province.”

(The January hearings on the Enbridge pipeline are different because that in terms of the NEB mandate is a “facility” hearing, not a simple licence hearing and therefore portions of the federal Environmental  Assessment Act come into play.)

In the decision, the board  members rejected those arguments:

First, the board said that even if the application does not trigger a CEA Act assessment, “that does not preclude the Board from considering potential environmental effects  and directly related social effects of gas exports when assessing the application.”

The NEB went on to to note that the board  has found a “necessary connection” in previous gas export applications, therefore: “The Board will consider environmental  and related social effects of a proposed export  if those effects  are necessarily connected to the exportation….”

So the board found that it did have the jurisdiction to examine the environmental effects of  marine shipping activities,  the natural gas terminal and the Pacific Trails Pipeline that would lead to the terminal at Kitimat.

On the pipeline and the terminal, the board then says:  “that no evidence was placed on the record  to suggest that  there are any environmental effects  directly connected to  this proposed  export that has not already  been addressed by the appropriate regulatory agencies.”

As for the effects of marine activities  the NEB says  the Transport Canada TERMPOL process (which is also looking at the bitumen tankers that will be on the coast if the Enbridge project goes ahead)  was sufficient.

The Board is of the view that potential environmental  effects and directly related social effects have been considered ….or will be considered through TERMPOL….Based on the foregoing, the Board is of the view that work conducted under the relevant federal and provincial legislation  and process is not warranted  and the Board has been able to to adequately consider the environmental  and related social effects in  making a decision on the export licence.


In other words, the National Energy Board ruled that it can maintain its jurisdiction over the environment, if necessary, but not necessarily do anything about it, if someone else is  apparently already doing the job.

As was frequently pointed out in the June hearings, the NEB mandate is what is called “Market-Based Procedure” when it comes to natural gas. That policy came into effect in 1987,  and was founded “on the premise that the marketplace  will generally operate  in such a way that Canadian requirements for natural gas  will be met a fair market prices.”

The year 1987, of course, was at the height of the political and economic love affair with the marketplace.  Now in October 2011, the “Occupy” demonstrations in almost every major city on this planet and many small towns, show that this love affair has gone sour.

While the Enbridge  Northern Gateway Joint Review has a wider mandate, the problem remains. 

No image of planet Earth shows national boundaries. Nor does an image of planet Earth show the bureaucratic fault lines between the National Energy Board, Transport Canada, the Environmental Assessment Agency, not mention the provincial agencies.

The mandate for the NEB is more than 25 years out of date. National Energy Board hearings are limited by narrow rules of procedure which the energy company lawyers try again and again to use to their advantage. 

These problems aren’t going to go away as the natural gas rush accelerates.

No one is looking at the “big picture.” Who knows what will fall through the cracks?  No one ever cares about the unexpected consequences until there is 20/20 hindsight.

The problem, of course, is that there is no recourse for this problem. Stephen Harper’s government is cutting staff at Environment Canada, defunding environmental advocacy and watch dog groups (even those supported by industry) and like all conservatives somehow think that more deregulation will somehow bring back the jobs that the deregulated financial sector destroyed.

The NEB notes that the  1985 Western Accord that set up the current rules for the board is also called the “Halloween Agreement.” 

Scarey.

National Energy Board decision on KM LNG

Bitumen or no bitumen? That is the question in the pipeline

Energy

On Thursday, Enbridge CEO Patrick Daniel told Reuters that the company “would prefer to supply natural gas to the Kitimat liquefied natural gas plant in British Columbia over any other export project in western Canada.”

That immediately raised a question in the northwest is Enbridge thinking of replacing the Northern Gateway bitumen pipeline with a natural gas pipeline? Or is it planning two pipelines?

So far Enbridge has not responded to a request from  Northwest Coast Energy news for clarification.

This afternoon, Jeff Lewis writing on Alberta Oil’s website in Another suitor sidles up to Kitimat LNG says:

No word yet on whether Tim Wall, the CEO of Apache Canada Ltd., is keen to take on another partner for the massive development. (The Reuters report has Enbridge building a natural gas line in conjunction with its proposed Northern Gateway line, which is to be twinned with a pipe for importing bitumen-thinning condensate from the coast; there’s no mention of sending natural gas west on the Gateway website).

But the question still remains. The Reuters report actually isn’t that clear on whether it will be a bitumen pipeline twinned with a natural gas pipeline or a natural gas pipeline substituted for the bitumen pipeline.

Here is what Reuters said.

Enbridge plans to build a natural gas pipeline along the route of the proposed Gateway oil line, which would transport natural gas from Horn River and other natural gas fields to the coast by 2016, Daniel said.

There is already speculation and rumour in Kitimat about the Enbridge announcement. Environmental activists have long feared that there would be a twinning of the two projects, while many people sitting on the fence were willing to accept liquified natural gas but not bitumen.

If there is any truth to the rumours circulating in Kitimat, there may be more corporate announcements after the Thanksgiving holiday weekend that will make the situation a little clearer.

A window of opportunity opens in Japan for Canadian LNG: Alberta Oil

Energy

Alberta Oil magazine says in A window of opportunity opens in Japan for Canadian LNG

Nuclear outages in Japan continue to stoke demand for delivering Canadian gas to the Far East. Look for oil- and natural gas-fired generation to offset a precipitous drop in atomic capacity as maintenance work at plants, combined with public safety pressures, keeps a fleet of 54 reactors from running at full capacity, the International Energy Agency (IEA) says. Japan’s nuclear reactors normally account for 27 per cent of the country’s electricity demand, but only 16 were online in August, five months after a massive earthquake rocked the coastal city of Sendai and sent officials scrambling in search of alternatives to the atom.

The country is one of several potential sales destinations for a suite of liquefied natural gas (LNG) terminals taking shape on Canada’s West Coast at Kitimat, British Columbia. Two of the most advanced proposals, including a 10-million-tonne capacity project led by Apache Canada Ltd. and another, smaller co-operative that would ship 1.8 million tonnes abroad annually, are both seeking 20-year export licenses from the National Energy Board….

Will propane be added to the Kitimat’s “hot” energy scene?

Energy Link

The energy industry monitor Argus Media speculated Tuesday that propane could be added to Kitimat’s energy scene, as an ingredient to upgrade the natural gas that will be exported to Asia.

In Propane market ponders ‘hot’ LNG potential of Kitimat  Argus says propane traders are keeping a close eye on the proposed liguified natural gas projects in Kitimat.

Argus says;

Many Asian countries that buy LNG –
including Japan – have higher Btu standards for their gas, which can be
achieved by adding propane to create so-called “hot” LNG.

Propane can be added to the LNG either at the import facility to
enrich supply to the country’s Btu standard or at the export facility
before the LNG goes to market.

Depending on supply contracts and pricing, it could make sense to add
propane to LNG produced at Kitimat, and such a move might impact the
long-term NGL market in western Canada, traders said.

BTU, or British Thermal Units is a way of measuring the energy out put of the natural gas.

Apache spokesman Bill Mintz  told Argus that the ideas about propane being added to the Kitimat energy mix was premature speculation.

Japan seeking LNG from US: Reports

Energy Links

Japan wants to buy more liquified natural gas from the United States, according to reports in the business and energy media.

Bloomberg reported Japan to Boost LNG Imports From U.S. as Nuclear Power Declines

Japan, the world’s largest importer of liquefied natural gas, plans to seek more U.S. cargoes to ensure adequate power supplies after its use of nuclear reactors fell to an all-time low.

Japan’s senior vice minister of trade and industry, Seishu Makino, asked U.S. Energy Secretary Steven Chu at a meeting yesterday in San Francisco to increase LNG exports, Akinobu Yoshikawa, deputy manager for the Petroleum and Natural Gas Division, told reporters today in Tokyo.

Reuters reported Japan to start buying LNG from U.S. by 2015-Nikkei

Japan plans to start importing liquefied natural gas (LNG) from the United States as early as 2015 to secure a steady supply amid growing demand for the fuel, Nikkei business daily reported…

Japanese power and gas utilities would initially import 2-3 million tons of LNG a year, the daily said. Gas extracted from shale rock formations will be liquefied in Texas and Louisiana. The LNG will then be shipped to Japan via the Panama Canal, Nikkei said.

Liquified natural gas from fields in Alberta and British Columbia sold to Japan is a major reason for LNG developments at the port of Kitimat. Testimony at last June’s NEB hearings on the KM LNG export licence application warned of increasing competition from the US for Canadian LNG.

“Front End Engineering” begins for BC LNG

Energy

The Hart Energy  E&P (exploration and production) newsletter is reporting that an Overland,  Kansas based company, Black & Veatch,  a multi-billion dollar, employee-owned engineering firm founded in 1915,  is beginning front end engineering (FEED) for the second proposed Kitimat liquified natural gas facility, BC LNG.

Although no information appears on the Black & Veatch website, the newsletter quotes Tom Tatham, the managing director of  Douglas Channel Gas Services Ltd, the company which will contract with energy firms wanting to export through the BC LNG facility as saying:  We are looking to build the majority of the LNG export facility on a standard Panamax barge to minimize the physical and environmental impact in this scenic area.”

(The name Panamax derives from the maximum size that a barge or ship can be to pass through the Panama Canal, which means the LNG from the port of Kitimat could be shipped to anywhere in the world, not just to the projected Asian market)

 Black & Veatch has developed a process called PRICO which Tatham says  is ideal for this type of application because of its smaller footprint and flexible operations.

Black & Veatch’s engineering planning is scheduled to be complete by January 2012 and will provide a “definitive estimate” that will be used for costing  engineering, procurement, construction, testing and commissioning of the facility.

The newsletter quotes  says Dean Oskvig, president and CEO of Black & Veatch “The global LNG export market is extremely cost-competitive,” and  Oskvig says the company`s process will be scalable and thus allow the partnership to bring liquified natural gas to market at a competitive price.

The Black & Veatch website briefly promotes  the PRICO process as simple, flexible, reliable and economic but gives few details.

The company has an Edmonton based Canadian subsidiary.

 

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NEB gets ready for BC LNG hearings, first step for second Kitimat project

Energy

The National Energy Board has announced it will hold hearings on the second proposed liquified natural gas project, saying, the hearings will “consider an application submitted by BC LNG Export Co-operative LLC (BC LNG) for a 20-year licence to export liquefied natural gas (LNG)
from Canada to Pacific Rim markets.”

Once again under the NEB’s rules of procedure, the hearings will be limited to granting the export licence, with or without conditions and will follow the so-called “market-based procedure” set up for the NEB after deregulation of the oil and gas industry in the late 1980s.

This application is based on projections that the demand for natural gas in Pacific Rim markets will continue to increase substantially over the next 20 years. In its application, BC LNG is requesting authorization to export up to 1.8 million tonnes of LNG annually.

The Board will consider, among other issues, the export markets and natural gas supply, the transportation arrangements, and the status of regulatory authorizations.

However in an apparent departure from the KM LNG hearings where energy lawyers challenged environmental and social issues as not included in the mandate for those hearings, these ground rules say they are now”

The Board will also consider the potential environmental effects of the proposed exportation, and any social effects directly related to those environmental effects.

The public has until Sept. 11, 2011 to register with the board for full intervenor status, request to make an oral statement or to submit a letter of comment.

Letter from NEB to BC LNG (pdf)

KM LNG final arguments set for Thursday in Calgary

The National Energy Board panel hearing KM LNG’s (also known as Kitimat LNG) application for an natural gas export licence will hear final arguments from the lawyers for the various parties at the NEB offices in Calgary beginning at 9:30 a.m. MT Thursday.

The hearings which began in Kitimat in June, resumed Wednesday in Calgary.  Most of the day was spent with testimony and discussion about how various regulations in a number of countries could affect the Kitimat project.   Some witnesses testified that the Asian countries which could be the prime market for any liquified natural gas exported through Kitimat are nervous about the reporting and disclosure requirements required by some Canadian regulations.  There could be conflicts between those regulations and the customers desire to keep some information proprietary and confidential or, in cases where the LNG is purchased by a national government that government’s national security practices may also prevent some disclosure.  Some witnesses worried that the Canadian requirements just might be a deal breaker for some Asian customers who want ease of access as well as security of supply and thus would not want to be tangled in red tape.

 There was also some discussion of the need to reconcile the Canadian reporting requirements with those the US Securities and Exchange Commission.

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