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.

We’re not afraid of Kitimat, Oregon rivals say, as papers filed for LNG export terminal permit

Energy

The Jordan Cove Energy Project, often cited by energy industry experts as Kitimat’s chief west coast rival as a liquified natural gas export project,  sent a $50 filing fee to the United States Treasury on Friday,  thus notifying the US Federal Energy Regulatory Commission that the company  is seeking to export liquified natural gas from its planned $3.5 billion terminal at Coos Bay, Oregon.

Although testimony at June’s National Energy Board hearings cited Coos Bay as a rival that could take LNG business away from Kitimat, the view from Oregon appears to be just the opposite.

545-jordancove.jpgJordan Cove project manager Robert Braddock told the industry newsletter, Platt’s Gas, that he is “not afraid of competition from the north, where Kitimat LNG is planning an export terminal in British Columbia. ‘We actually presume that Kitimat would be built,” Braddock said. “We assume that we would be built number two and we think there is plenty of room for two such facilities on the West Coast.’

Braddock also told Platt’s that Oregon is not a rival for BC or Alberta gas nor competition for LNG terminals in Louisiana and Maryland. “The principal difference is we have access to a different range of resources from both Canadian gas and US gas. But equally important is we would have certainly much closer access to the Asian markets,” he said.

The Oregonian newspaper reported that prospective customers in Asia for the Coos Bay project may be waiting to see what happens in Kitimat before signing on with Jordan Cove. Braddock told the Oregonian that the  company “is still testing the waters with potential customers, and won’t go ahead with the expensive and byzantine permitting process without firm commitments from terminal users.”

The pro forma initial application filed Friday informs the  US Department of Energy that company wants to export up natural gas to countries  that have a free trade agreements with the United States.  Similar to the National Energy Board hearings on KM LNG, the Federal Energy Regulatory Commission must now hold hearings on the export licence application.

In another similarity, a few years ago, the Kitimat  plans called for an LNG project to import gas. Jordan Cove received  approval in 2009 to build a terminal to import LNG and to build a 370 kilometre (280 mile) pipeline that would carry the gas to Malin, Oregon, on the California border.  

If the US Department of Energy approves the new application, the terminal would become an export, not an import, facility.

In another parallel with Kitimat, like the Enbridge Northern Gateway Project bitumen export proposal, the Coos Bay project has prompted stiff opposition for years. The Oregonian reports “landowners and environmentalists in the region mounted a fierce campaign to block three proposals to build LNG import terminals in Oregon, including the one in Coos Bay,” in the belief that the terminals and associated pipelines would harm forests, farms and salmon habitat.  The newspaper also says that local business groups and unions have supported the import projects, which would bring jobs and tax revenue.

An environmental lawyer, Susan Jane Brown, a staff attorney at the Western Environmental
Law Center, told Platt’s Gas she is still digesting the news, but that said the export
plan will likely rankle her clients, environmental organizations and
landowners. “It would be one thing to
import a good that would be used domestically. But exporting a
domestic product that they have long advocated that we need
domestically, it is a bait and switch,” she told Platt’s.

A powerful local politician, Senator Ron Wyden, an Oregon Democrat  is skeptical of the idea of exporting LNG from the US and told the Oregonian: “I think it’s premature to conclude that the United States now has so much natural gas that it can afford to export it overseas…I think there ought to be a time-out on approving LNG exports until there is a better understanding of how much natural gas there is, whether it can be safely extracted, and what the impact on the U.S. economy would be from LNG exports.”

Sen. Wyden’s opposition is in stark contract with the various consultants and economists who testified at the Kitimat hearings in June which envisioned a totally integrated North American natural gas marketplace with pipes snaking all over the continent delivering the cheapest and most convenient gas to the nearest market.  Wyden’s remarks may be an indication that American politics could put the break on the ideal free market visions of the experts that were expressed before the NEB.

548-ruby logo.jpgSimilar to plans to take shale gas from the Horn River Formation in northeastern BC, Jordan Cove would tap into the Ruby Pipleline,  a  1,000 kilometre (680-mile), 42-inch diameter that would carry shale gas from the Rockies to a hub in Wyoming and then to Malin, Oregon to connect with the Jordan Cove pipeline there.

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Links: Japan seeking more sources of LNG

Energy LNG Links

Post-earthquake Japan is said to be one of the main markets for liquified natural gas that will flow through the LNG terminals under construction and proposed for the port of Kitimat. Since the earthquake Japan has been making major purchases of LNG from both Qatar and Russia.

The Doha, Qatar-based, Gulf Times is reporting: Qatar LNG exports to Japan up

Qatar is about to overtake Indonesia as the third-largest exporter of liquefied natural gas to Japan, which has been increasing LNG imports to generate electricity to offset capacity lost due to the March 11 earthquake and tsunami.
Japan, the world largest LNG buyer, imported 870,072 metric tonnes of LNG from Qatar in July, up 53% on year, finance ministry data showed yesterday.
During the same month, Japan imported 731,557 tonnes of LNG from Indonesia, down 36% from a year earlier, the data showed.
In the first seven months of this year, Japan bought 5.64mn tonnes of LNG from Qatar and 6.33mn tonnes from Indonesia, up 28% and down 15% from a year earlier, respectively.

At the same time, the industry (subscription only) Petroleum Economist newsletter, is reporting that shortages from Qatar is causing concern in the UK natural gas market, Qatar LNG outage rattles UK gas market

UK gas prices jumped over 10% this week after the world’s largest liquefied natural gas (LNG) producer, Qatargas, said it would shut its facilities for rolling maintenance over the coming months. Last year, according to Cedigaz, the UK imported about 20% of the 93.8 billion cubic metres of gas it consumed in the form of LNG, making the country particularly vulnerable to global LNG supply issues.

Japan is still a heavy buyer of liquified natural gas in the spot market, the Platt’s newsletters report. Kyushu Electric secures four spot LNG cargoes over Oct-Nov

Japan’s Kyushu Electric has secured sufficient additional LNG requirements for autumn, with a total of around four spot LNG cargoes for October-November, a source close to the matter told Platts Tuesday.

Kyushu Electric’s additional LNG volumes this autumn could reach 240,000-260,000 mt, assuming that the purchased volumes are the standard 60,000-65,000 mt LNG cargoes, according to Platts calculations.

“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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Energy media turns its eyes on Kitimat, LNG and Enbridge

The prospect of Kitimat becoming a major port for export of Liquified Natural Gas was bound eventually to spark interest in the media covering the energy sector.

This week, photos of Kitimat mayor Joanne Monaghan turned up on as the lead on stories in Alberta Oil magazine and The Financial Post.
In Alberta Oil’s Export visions stoke deep divisons in a coastal town, the longest of the two articles,  feature writer Jeff Lewis, puts the history of Kitimat into some perspective for the Alberta oil patch. 
Alcan came to northern British Columbia in the early 1950s with plans to build the world’s biggest aluminum smelter…. 

Even by today’s standards of engineering, the $500-million “Kitimat Project” was ambitious…. They bored into a mountain to create the Kemano hydro plant. They blasted enough rock to dam and reverse the Nechako River. They strung high-wire transmission towers across a rugged valley. And they built Kitimat – complete with schools, pre-fabricated houses floated in on barges, roads and even a toastmasters club – from scratch. 

It is to this history that Mayor Joanne Monaghan refers when she dismisses fears about development in the region ruining a natural wilderness. “Kitimat is geared to be an industrial town,” she says over lunch at the local Chalet Restaurant. “That’s what it was built as.” Distinct neighborhoods and services were laid out for a population many thought would crest 50,000, with heavy industry built at a remove from the commercial and residential areas of town. 

 The vision never quite materialized…  Monaghan… insists job prospects in the town are poised for recovery. The unemployment rate was 9.5 per cent in 2006. “I think it can only get better from here,” the mayor says. “I really feel like we’re a sleeping giant, and the giant is waking up.” 

It is also true that the town remains partially stuck, very much groping in what is perhaps the darkest hour before the mayor’s dawn. Local divisions aren’t limited to the physical split between the town’s industrial park and its residential streets. While the Apache-sponsored gas terminal has progressed to the point where site preparation is underway, Enbridge’s Northern Gateway faces tremendous opposition – from the Haisla, but also from pockets of local residents. The multibillion-dollar pipeline has underscored deep-seated tensions in the region to such an extent that the local council refuses to talk about it. Some, including Monaghan, favor a referendum on the project. “It’s a contentious issue,” she says.

The Financial Post’s energy reporter Claudia Cattaneo focuses more on the issues on her beat in LNG Trying to Dock    Catteneo notes that the March earthquake in Japan which crippled the country’s nuclear energy raised interest in exports of liquified natural gas from Alberta through the port of Kitimat.

Her article also reflects the hints of skepticism that have arisen about natural gas exports in the past couple of weeks.  She points out that part of the price advantage that Alberta gas may have in Asia is not the “molecules” the term so beloved of  the experts in the energy industry but “arbitrage” the difference between the Asian price of natural gas which is a percentage of the price of oil (which is going up) and the North American price, which is based on supply and demand, North American gas  supply is up due to exploitation of the shale gas reserves and so the price of natural gas has dropped. (Kitimat residents of course haven’t noticed the drop in the price of natural gas due to the high transportation “bill” charged by the local monopoly Pacific Northern Gas).  The companies that want to build a port at Kitimat are basing part of their profit picture on that price difference.
Cattaneo quotes Chris Theal who works for a Calgary hedge fund who says that the Asian demand for natural gas will continue to increase in the coming years, but export could be strangled by limited capacity on the BC coast even if all the projected Kitimat projects go ahead and there is an expansion of the port of Prince Rupert to handle natural gas from pipeline or rail tanker. Theal says (ideas that also recently came out at the NEB hearings in Kitimat) that alternative export ports could exist in the United States at ports like Coos Bay and Clataskanie, Oregon and Astoria,Washington.

Three pipeline builders race to reach new markets Keystone, TMX and Gateway: Alberta Oil

Alberta Oil 

Pipelines have never been so popular. For years, the steel conduits followed unseen routes. They carried rivers of crude oil beneath city and town alike, rarely drawing so much as a passing thought from those who depended on their valuable cargo. Today, proposals by Kinder Morgan Canada, Enbridge Inc. and TransCanada Corp. face fierce opposition in a bid to carry more Canadian crude oil – chiefly increased oil sands production – to new markets.

Excerpt from Alberta Oil interview with Nlorthern Gateway President John Carruthers

 

The primary markets where we would see the most value are China, Japan, South Korea and Taiwan. Now once the oil reaches tidewater it can access any market. We would see crude going periodically to different markets. But those four markets in particular have strong demand. The proximity of Canada to those markets and the fact that they can process Canadian crude is all very positive. Potentially the oil could also go to California.

Shell says it’s looking at B.C. Coast for new LNG terminal: Vancouver Sun

Vancouver Sun


Shell says it’s looking at B.C. Coast for new LNG terminal

Shell Canada says it is investigating the potential for a new liquid natural gas terminal to be located on the B.C. coast.

Shell “is interested in, and currently exploring LNG opportunities along the B.C. coast,” Stephen Doolan, of Shell’s media relations department said in an email to The Sun.
“We are early in the evaluation process so do not have specific details but are pursuing opportunities,” he said. “Natural gas is a key area of growth for Shell. In terms of LNG, we will continue to invest in our global leadership position as demand continues to grow

.

The case for co-operation Why Shawn Atleo and Pat Daniel should have lunch: Alberta Oil

Alberta Oil

The case for co-operation Why Shawn Atleo and Pat Daniel should have lunch

A great, though as-yet untapped, ally in the quest to deliver Alberta crude to the Far East could be Assembly of First Nations National Chief Shawn Atleo, who in the same Globe piece lamented the glacial pace of treaty negotiations and the resulting impact on industrial development. “What we have is the potential for perpetual and repeated conflict,” Chief Atleo told the paper. “That doesn’t do anyone any good. It has an adverse impact on not only relationships but overall the economy.”

Editors Note: This online column in Alberta Oil magazine by Jeff Lewis, is based on an interview with Enbridge Northern Gateway CEO  John Carruthers,with this quote

Carruthers, the company’s Gateway chief, reiterates the nation-building argument in the June edition of Alberta Oil. “Accessing alternative, large and growing markets provides critical value for Canadians…”

The Carruthers interview is not available online at this time,

Shale Gas, LNG & the Coming Impact of Wet Shale: Energy Tribune

Energy Tribune

Shale Gas, LNG & the Coming Impact of Wet Shale

The first hint that the paradigm was not shifting so much as shattering was in 2009 when the planned Kitimat terminal in British Columbia was reborn as an export terminal. The gas would come from western Canada’s Horn River and Montney shales. Pre-2009, the theory was that gas imported to Kitimat would compete for Asian markets with gas from Australia and Peru. Post 2014, when the terminal will be completed, BC gas will compete in Asian markets against Australian, Peruvian and many more LNG exporters who had seen one leg of the three-legged world gas stool of North America, Europe and Asian markets sawn off.

This year we are seeing talk of LNG exports from another terminal near
Kitimat and possibly even from Oregon. But the big game changer occurred
in May 2010 when Cheniere Energy, operator of the Sabine Pass LNG
terminal on the Gulf of Mexico announced plans to export US gas from
2014 – a plan quickly added to by other operators in Cameron LA and
Galveston.