Apache Corporation | Northwest Coast Energy News

Pacific Trails Pipeline holds community meetings

Pacific Trails Pipeline meeting — Hatha Callis, left, of Progressive Ventures Construction, discusses contracting possibilities with the staff of the Pacific Trails Pipeline at a community meeting in Terrace, BC, March 1, 2012 (Robin Rowland/Northwest Coast Energy News)

Pacific Trails, which has proposed to build a natural gas pipeline from Summit Lake, near Prince George, to Kitimat, held four community meetings in Vanderhoof, Burns Lake, Houston and Terrace, to discuss changes to a plan for the pipeline that was approved the BC Environmental Assessment Office in 2008.

Paul Wyke, a spokesman for Apache Corp., one of the main investors in the Kitimat LNG project as well as the Pacific Trails Pipeline, said the companies considered the meetings successful. About a dozen people showed up in Vanderhoof and Burns Lake and about 25 to 30 in Terrace and Houston, perhaps an indication of the lack of controversy, so far, for the PTP, which will follow roughly the same route as the Enbridge Northern Gateway pipeline. Apache and Pacific Trails also took part in a job fair on February 10 in Burns Lake, the town hard hit when a huge explosion flattened the Babine Forest Products sawmill on January 20, killing two, injuring 19 and left about 250 workers jobless.

About half the people showing up at the meetings were interested in job or contracting opportunities while the rest were concerned about environmental issues.

Nathan Hagan-Braun, project assessment manager for the BC Environmental Assessment Office, who also attended the community meetings, said that a decision on approval of the amendments to the PTP plans will likely come in May.

PTP says that once the project adjustments are approved, logging and clearing is scheduled for the summer of 2012, pipeline construction in 2013 and 2014, with the pipeline going into operation in 2015.

Egyptian LNG terminal is model for Kitimat project: Encana

Energy

The rugged, rocky, windswept shoreline of Douglas Channel and Kitimat harbour are very different from the Nile Delta, a gigantic flat estuary, so much bigger than the Kildala or Giltoyees, warm, on the Mediterranean, a cradle of human civilization.

KBR, the main contractor for the Kitimat LNG project front end engineering, is basing its planning for the Kitimat terminal on a project it built in Egypt, Dave Thorn, Encana Vice President of Canadian Marketing told an investor conference call on Tuesday, Oct, 4, 2011.

Thorn told the call that plans for the Kitimat terminal are based on the “Seagas” terminal in Damietta, (also known as Dumyat) Egypt, 60 kilometres west of Port Said on the Nile Delta.

The terminal is used to export liquified natural gas from fields in Egypt to customers in Spain.

In 2000, what was then Haliburton KBR was given the contract for front-end engineering and design (FEED) through a joint venture in Egypt, Damietta LNG Construction Llc. The joint venture later got the contract to build the LNG terminal complex.

The terminal is formally called SEGAS, an acronym for the Spanish Egyptian Gas Company.

According to the Wikipedia entry, the output capacity of the plant is 5 million tons of LNG per year. The complex includes the LNG liquefaction train, inlet gas reception area (metering and analysis), natural gas liquids removal and fractionation area, a docking jetty for tanker loading and transportation, LNG refrigerated storage and export facilities (tanks and booms), utilities and supporting infrastructure (power, water and roads), gas metering and treatment facilities (acid gas removal and dehydration), refrigerant condensate and LNG storage (two 150,000 m³ PC LNG storage tanks). The total investment costs of the LNG complex were around US$1.3 billion.

Unlike Kitimat, where the natural gas will come from the Horn River Basin, the natural gas in Egypt is close to the terminal, in large fields under the Nile Delta. The plant is supplied by natural gas from the West Delta Deep Marine Concession Area about 140 kilometres (90 mi) from the LNG complex.

About 3.2 million tons of LNG is sold to Unión Fenosa Gas which has a receiving terminal at Sagunto, Spain. The rest is sold on the open market by the Egyptian Natural Gas Holding Company.

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In ancient history the port was known as Tarniat, It was later overshadowed by the growth of nearby Alexandria. From seventh to the twelfth centuries, under Muslim caliphs, Diamietta was both an important naval base and an import point for goods from as far away as China. Today, in addition to the LNG terminal, it has a major container port.

KBR, formerly Kellogg Brown and Root has been involved in construction, mostly in the energy industry, for more than a century. For many years the company was part of the Haliburton empire, but was spun off in 2007 and is now headquartered in Houston, Texas.
The company was recently involved in a number of scandals and lawsuits, mainly tied to its role as a prime contractor for the US military in Iraq.

China biggest customer for Kitimat LNG: Encana

Energy

China is probably the largest long
term customer for liquified natural gas that will be shipped through
the port of Kitimat, executives from Encana, one of the three
partners in the KM LNG project said in an investor conference call
Tuesday, Oct. 4, 2011.

India could also be big customer for
LNG shipped from the Horn River in northeastern BC through Kitimat,
Encana said.

Although Japan will be increasing its
purchases of liquified natural gas in the coming years, the immediate
situation with Japan is less certain. While the March 2011
earthquake and tsunami knocked out the Fukishima nuclear plant and
prompted Japan to scale back other nuclear plants and increase LNG
purchases, Encana says the country has still not come up with any
definite policies

Dave Thorn, Encana vice president of
Canadian marketing, who also oversees the Encana’s role in the
Kitimat project, said that China’s overseas imports now account for
eight per cent of its purchases of natural gas. That is expected to
rise to 10 per cent in the next few years. Thorn said there is a big
gap between current LNG contracts and what Encana says is long term
demand from China. He speculated that there could be increasing
demand from China during the 20 years or so the Kitimat LNG project
is exporting LNG. ( As well as projected population and
manufacturing growth, even in a weak economy, China is now heavily
dependent on coal, but is also investing in “green” projects
which means there could eventually be a switch from coal to natural
gas).

The fact that one giant Chinese
customer, PetroChina, pulled out of a deal with Encana earlier this
year doesn’t seem to be a setback. Thorn said that there is strong
interest from at least six unnamed major customers for LNG to be
shipped through Kitimat. “The expression of interest ranged from
simply LNG supply to existing or planned regasification facilities
through to participation all along the value chain from shipping,
equity interest in the Kitimat facility as well as upstream
participation,” Thorn said.

The Kitimat project is currently
undergoing a front end engineering evaluation by KBR. There is a
similar study under way on the Pacific Trails Pipeline that could
carry the natural gas to the terminal. Both studies are expected to
be complete by the end of 2011. Encana expects the National Energy
Board to approve KM LNG’s application for an export licence in
December. Encana and its partners, Apache Corporation and EOG
Resources, expect to make a final investment decision in January
2012.

If all goes as planned the Kitimat
terminal would be shipping 700 million cubic feet of natural gas a
day to Asia when the terminal begins operations in 2015. Encana and
its partners are already optimistic, talking about plans to double
capacity to to 1.5 billion cubic feet a day in the coming years.

What’s driving much of this is the
high price of natural gas in Asia, which is pegged to the price of
oil, compared to North America where natural gas prices are
determined by the marketplace. With shale gas increasingly abundant
the price on this continent has been dropping and that has affected
the bottom lines and stock prices of Encana and other natural gas
producers. Encana is also bolstering its bottom line by tapping
“liquid-rich reserves” (oil and natural gas) that may be found
in the areas where they are currently pumping natural gas.

The Horn River Basin area in
northeastern BC was a surprise discovery by an Encana crew in 2003,
said Kevin Smith, Encana Vice President of New Ventures. The company
then began to quietly acquire assets, either by buying land or by
leasing in the region. “The Horn River resource base is enormous,
highly accessible and will certainly play a large role in North
American and even global gas supply in the years to come,” Smith
told the conference call.

During the June NEB hearings in
Kitimat, witnesses described the Horn River formation as special but
were reluctant to go into detail. Smith said the shale in the Horn River
is “all the attributes for high productivity,” including large
reserves and “overpressured system” which helps extraction. “It
keeps getting better and better.”

As well as going west to Asia, natural
gas from Encana’s Horn River assets will go east to Alberta to fuel
bitumen sands production which Smith said will require an additional
1.3 billion cubic feet a day by 2020, This is likely to be
controversial with the environmental groups and bitumen sands
opponents who have always taken issue with the idea that clean
natural gas would be burned to help get crude of the dirtier bitumen
sands.

Encana says it has developed a “hub”
system in the Horn River where a central well site can use horizontal
drilling to tap areas where once many wells would have been needed.

“Fracking” or fracturing shale gas
requires large amounts of water. As was pointed out in the June
hearings in Kitimat, Encana has tapped an ancient, underground alt
water reservoir called Debolt which allows it to reuse the water from
the formation and minimizing use of local fresh water.

British Columbia is helping the shale
gas industry with favourable royalties in the northeast including
royalty credits for building infrastructure in the region.

Encana, however, is under pressure
from inflation. It faces rising costs from steel, labour and all
kinds of services. While it supplies the bitumen sands with natural
gas, it is also in competition with the Fort MacMurray area for
supplies and labour.

Australia, Canada rivals in “new frontier” of liquified natural gas

Canada and Australia are rivals in the “new frontier” of liquified natural gas export sales to Asia, a panel of energy marketing executives told the National Energy Board Tuesday at hearings into the KM LNG in Kitimat.

The “marketing panel” testifying before the board included Kenny Patterson, Vice President LNG Marketing and Shipping for Apache Energy, Sean Bolks, Apache Director of Corporate Risk Management, Jamie Bowman, Vice President of Marketing for EOG and David Thorn,Vice President, Canadian marketing for Encana and two consultants.

Patterson told the NEB at more than one point during his testimony that Canada was the “new frontier” for liquified natural gas, and so was attracting a good deal of interest from countries across East Asia who need more natural gas supplies.

Patterson and the other executives on the panel refused to be specific on who the customers actually are, despite cross-examination from NEB counsel Parvez Khan and additional questions from the NEB presiding member Lynn Mercier.

Patterson said Apache couldn’t go into individual buyers, so Khan asked: “How many different buyers n a general sense?” to which Patterson replied that in Asia, the KM LNG partners, which include Apache, EOG and Encana, were general discussions with seven to eight major Asian LNG companies as well as other smaller players.

That answer came despite the fact that earlier in the day in Kuala Lumpur at the Asia Oil and Gas Conference, Mate’ Parentich, general manager of LNG marketing at Apache, said the company would soon conclude talks on the sale of 85 percent of liquefied natural gas from the Kitimat terminal.

Asked for specifics by Bloomberg News, a Houston based Apache spokesman Bill Mintz then said that no binding contracts had yet been signed for the Kitimat project.

Bloomberg later moved a corrected and updated version of the story, including the statement that no contracts have yet been signed.

Khan asked about one Memorandum of Understanding signed with KM LNG. Again the panel refused to be specific. Bowman said the MOU had been signed with the previous partnership in KM LNG and while the MOU had not yet expired, it was subject to further negotiations.

Khan and Mercier were both aware that any agreements with potential buyers were “subject to regulatory approval,” which, of course, is the National Energy Board’s role, but again they were unable to drag any specifics out of the executives on the marketing panel.

The panel members told the NEB members that Korea and Taiwan are already well established LNG markets and China was beginning to be more aggressive as an LNG buyer. Japan, which was devastated by the earthquake in March and lost of a lot nuclear powered electrical generation capacity is now scrambling to catch up with its Asian neighbors. The executives told the NEB panel that both Indonesia and Malaysia will also become more important buyers for LNG in the Canadian market as their domestic demand grows.

Noting that Patterson is based in Perth, Australia, Mercier asked the executives about the recent announcement by Shell that it would build a floating LNG platform off Australia.

Panel members replied that the Asian markets want long term, secure sources of supply, with multi-billion dollar contracts for between 10 and 20 years. As stable, market-driven countries with ample supplies of natural gas, both Canada and Australia could fulfill those needs, panel members said. Companies operating in both countries would require those multi-billion, multi-year contracts to justify the investment in natural gas extraction and transportation.

Jamie Bowman, Vice President of Marketing for EOG listens as fellow panel members testify before the NEB. (Robin Rowland/Northwest Coast Energy News)

Apache names new boss for Kitimat LNG project

Apache Corporation, of Houston, Texas, the main backer of the Kitimat LNG development announced a management shakeup Tuesday, May 31, including a new boss for the Kitimat project.

According to a news release issued by Apache, “Graham Lawton was named vice president –
liquefied natural gas (LNG) projects, leading the Kitimat project team
for the LNG facility and Pacific Trail Pipelines.”

Lawton is a new comer to Apache but has 30 years experience in the natural gas industry.
The news release describes Lawton this way:

Lawton joined Apache in March 2011. He brings 30 years of experience in the gas industry – with 15 years in LNG projects – and has worked in the United Kingdom, United States, Tunisia, Singapore, Trinidad, India and Peru. Prior to joining Apache, Lawton was vice president of LNG at Hunt Oil Co. since 2005 and served as general manager of COLP, the operating company of Peru LNG. Previously, he was operations director at Marathon Oil Co. where he worked for Equatorial Guinea (EG) LNG. Prior to that, he spent more than 20 years with BG Group. Lawton is a fellow of the Institution of Gas Engineers and Managers, a fellow of the Institution of Mechanical Engineers, and a chartered engineer. Lawton received a bachelor’s degree in mechanical engineering from the University of Sheffield in England.

PR Newswire release Apache Announces Changes in Operational Leadership