Controlling land and pipelines key to Haisla LNG future NEB filing says

The Haisla Nation’s plan for entering the LNG business is based on the idea that “it is anticipated that the Haisla Projects will be developed using a business model based on controlling two components of the value chain: land and pipeline capacity” according to its application to the National Energy Board for a natural gas export licence.

Cedar LNG Development Ltd., owned by the Haisla Nation, filed three requests for export licences with the NEB on August 28, under the names Cedar 1 LNG, Cedar 2 LNG and Cedar 3 LNG.  Another name used in the application is the “Haisla Projects.”

The 25-year export licence request is standard in the LNG business; it allows export of natural gas in excess of projected North American requirements. Thus like the NEB hearings for the Kitimat LNG and LNG Canada projects it is not what is called a “facility” licence which is what Enbridge Northern Gateway requested.

The project anticipates six “jetties” that would load LNG into either barges or ships at three points along Douglas Channel, one where the present and financially troubled BC LNG/Douglas Channel Partners project would be.

A second would be beside the BC LNG project, which may refer to the Triton project proposed by  Pacific Northern Gas parent company Altagas.

Both are on land now owned by the Haisla Nation in “fee simple” land ownership under Canadian law.

Map of Haisla LNG sites
Map from the Haisla application to the NEB showing that the Haisla Projects Region will allow for a total of six LNG jetty sites. One of these, on DL99, is currently ear-marked to be used for a project involving a consortium (BCLNG) One will be situated on the DL309 Haisla fee simple land and the other four jetties are to be  situated on the Haisla leased lands that surround the Chevron-led LNG development at Bish Cove. The map also shows that the Haisla own land at Minette Bay.

The other four would be on land surrounding the current Chevron-led Kitimat LNG project along Douglas Channel and in the mountains overlooking Bish Cove which the Haisla have leased.

Ellis Ross
Haisla Nation Chief Counsellor Ellis Ross at Bish Cove, June 19, 2013. (Robin Rowland/Northwest Coast Energy News)

The move last week and the revelation of the Haisla’s plans for the land are a cumulation of Haisla Nation Chief Counsellor Ellis Ross’s idea of restoring more of the First Nation’s traditional territory by buying or leasing the land using standard Canadian land law and at the same time getting around some of the more restrictive provisions of the Indian Act that apply to reserve land.

Just how the Haisla will go into the pipeline business is not as clear as the First Nation’s acquisition of the land. The application says:

The pipeline capacity required to transport sourced LNG to the Haisla Projects will include a mix of new and existing pipeline and infrastructure. The Haisla are in the advanced stages of negotiating and drafting definitive agreements with the major gas producers and pipeline transmission companies located in the vicinity with respect to securing pipeline capacity. It is expected that the Haisla Projects will rely on the Haisla’s business partners or customers to source gas from their own reserves and the market.

With the Haisla basing their business strategy on land and pipelines, the First Nation’s strategy is looking for  flexibility in what is a volatile and uncertain market for LNG.

The application says the Haisla “are currently in advanced stage discussions and negotiations with a number of investors, gas producers, LNG purchasers, pipeline transmission companies, technology providers and shippers. As such, the particular business models have yet to be finalized. However, it is anticipated that between the various Haisla Projects, multiple export arrangements may be utilized.”

As part of the idea of flexibility, the actual LNG infrastructure will be constructed and operated with potential partners. That is why there are three separate applications so that each “application will represent a separate project with independent commercial dealings with investors, gas producers, LNG purchasers, pipeline transmission companies, technology providers and shippers.”

The Haisla say that they are “working with a number of entities to develop business structures and partnerships to provide transaction flexibility, adequate financing, modern technology, local knowledge, and marketing expertise specific to Asian targets. The separate projects will accommodate expected production and demand and will also allow for a number of midlevel organizations to be involved with the various projects as well as traditional major gas producers and LNG purchasers.”

The Haisla are working with the Norwegian Golar LNG which had been involved in the stalled BC LNG project, using a Golar LNG’s vessels and technology, using a new design that is now being built in Singapore by Keppel Shipyard.

Golar LNG uses PRICO LNG  process technology developed by Black & Veatch,  (Wikipedia entry) “which is reliable, flexible and offers simplified operation and reduced equipment count.”

The filing says the project will “be developed using either barge-based or converted Moss-style FLNG vessels. The terminals will consist of vessel-based liquefaction and processing facilities, vessel-based storage tanks, and facilities to support ship berthing and cargo loading”

The jetties to be used for the Haisla Projects may be either individual FLNG vessels or “double stacked”, meaning that the FLNG vessels are moored side-by-side at a single jetty. The Haisla have conducted various jetty design work and site /evaluation studies with Moffat and Nichol.

The Haisla Projects anticipate that the construction will be in 2017 to 2020, “subject to receiving all necessary permits and approvals” and is expected to continue for a term of up to twenty five years. There is one warning, “The timelines of the Haisla Projects will also depend on the contracts and relationships between the Applicant and its partners.”

The filing goes on to say:

Haisla Nation Council and its Economic Development Committee are committed to furthering economic development for the Haisla. The Haisla’s business philosophy is to advance commercially successful initiatives and to promote environmentally responsible and sustainable development, while minimizing impacts on land and water resources, partnering with First Nations and non-First Nations persons, working with joint venture business partners, and promoting and facilitating long-term development opportunities.

The Haisla Applications will allow the Haisla to be directly involved as participants in Canada’s LNG industry, rather than having only royalty or indirect interests. The Kitimat LNG and LNG Canada projects, and the associated Pacific Trails Pipeline and Coastal Gas Link Pipeline, have increased economic opportunities in the region and the Haisla are very supportive of these projects locating within the traditional territory of the Haisla. The support of the Haisla for these two projects reflects a critical evolution of the Haisla’s economic and social objectives.

You can see the filing on the NEB projects page at http://www.neb-one.gc.ca/clf-nsi/rthnb/pplctnsbfrthnb/lngxprtlcncpplctns/lngxprtlcncpplctns-eng.html

Map from the Haisla Nation application to the NEB showing the proposed LNG developments in relation  to Douglas Channel.
Map from the Haisla Nation application to the NEB showing the proposed LNG developments in relation to Douglas Channel.
Bitumen map
Map from the Enbridge filing with the Joint Review Panel showing the same area with the proposed Northern Gateway bitumen terminal.

 

 

Golar confirms deal with Douglas Channel LNG

Golar logoBermuda-based Golar LNG has confirmed that it has signed a finalized contract for both feed gas supply and LNG purchase and off-take for train #1 of the Douglas Channel LNG Project, the smallest of the three (so far) proposed LNG projects in Kitimat.

Golar says in a news release:

The contract award for LNG purchase and off-take was made jointly to Golar and LNG Partners, LLC (Houston, TX) (“LNG Partners”) and the contract award for feed gas supply was made to LNG Partners.

The DC Project is being jointly developed by the Haisla Nation and Douglas Channel Gas Services Ltd and is expected to produce approximately 700,000 metric tonnes per annum of liquefied natural gas from the initial planned production facility beginning in the second quarter of 2015.

Golar’s participation in the project and its commitment to the LNG off-take remains subject to the Company reaching agreement with the current proponents of the DC Project for financing of the facilities, and receipt of all permits required for the project to proceed on a firm basis.

 

Golar LNG describes itself on its website as “one of the world’s largest independent owners and operators of LNG carriers.”

At the meeting of District of Kitimat Council on Jan. 21, 2013, Mayor Joanne Mongahan said that the BC LNG – Golar deal would mean enough business to fill about one LNG tanker each month. That volume of gas can be transported over the existing Pacific Northern Gas pipeline, Monaghan said.

Related Douglas Channel Energy signs preliminary deal for two LNG tankers

 

 

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 logoGolar 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.