Japan Petroleum approves LNG import facility in Fukushima Prefecture

Media reports say that Japan Petroleum Exploration (Japex) has given final investment approval to build a liquified natural gas receiving terminal and storage facility  at the Soma Port in Shinchi, Fukushima Prefecture to receive Canadian LNG, probably from Prince Rupert.

The company will also build a 40 kilometre connecting pipeline to move the natural gas to Japex’s main pipeline which will then connect with natural gas storage facilities in  Natori in Miyagi Prefecture and another facility in Niigata Prefecture on the Sea of Japan.

The Soma port was severely damaged in the March, 2011, earthquake and tsunami.

“We want to help areas affected by the disaster to create employment and secure a stable supply of energy,” Shoichi Ishii, Japex senior managing director,  was quoted by the Japanese newspaper Ashai Shimbum at a news conference on Nov. 27.

Japex owns 10 per cent of the planned Petronas LNG export terminal at Prince Rupert, which is expected to have an annual capacity of 12 million metric tons.

Japex plans to import 1.2 million tonnes of LNG made from  Canadian shale gas a year starting in 2018. The construction of the new LNG terminal in Shinchi, is scheduled for completion in 2017 and will start in 2014, at a cost of $587 million US.

The reports say with LNG import facilities on both the east and west coasts, that means Japan is ensuring a stable supply of LNG. If an earthquake or tsunami hits one coast, the other would likely be spared.

Ashai Shimbum also reports that Japex is considering building at an LNG fired power plant near the planned import and storage facilities to sell power to the struggling and controversial Tokyo Electric Power Co, owner of the nuclear power plant in Fukushima Prefecture that was destroyed in the March, 2011, earthquake and tsunami.

The newspaper says that because Japex does not have experience operating a thermal plant, it intends to work with other companies to run the new powerhouse.

Related The Australian Fukushima fallout fuels LNG demand

 

 

Scientists identify major Japanese-style tsunami hazard for west coast

American scientists studying the aftermath of the March 11, 2011, Tohoku, Japan earthquake and the resulting devastating tsunami say that a similar tsunami could be generated by an earthquake in the Aleutian Islands of Alaska.

The 9.0 magnitude Tohoku earthquake created a tsunami that was a high as 10-metres. The events killed about 18,000 people. Debris from the tsunami is now appearing on the west coast of North America.

The study, published May 8, in EOS, the Transactions of the American Geophysical Society, says:

A tsunami triggered by an earthquake along the AASZ [Alaskan-Aleutian Subduction Zone] would cross the Pacific Ocean and cause extensive damage along highly populated U.S. coasts, with ports being particularly vulnerable.

A subduction zone is where one tectonic plate, in this case, the Pacific plate, is forced down under another plate, the Alaskan continental arc.

Data from the Tohoku earthquake suggests that portions of the Alaskan-Aleutian Subduction Zone could be just as hazardous.

The study, by Holly Ryan, of the Pacific Coastal and Marine Science Center of the US Geological Survey in Menlo Park, Ca. and colleagues says the Japanese earthquake surprised scientists because the magnitude of both the earthquake and the tsunami were much larger than expected for the Tohoku region off northeastern Japan. The scientists say the region was originally considered low risk because the deep water section of the tectonic plate boundary that ruptured had been aseismic [a fault where there are no records of earthquakes] prior to the March 2011 event and was thought to be too weak to accumulate the strain to trigger a major earthquake.

In Japan and the Aleutians, there are seldom records of earthquakes where the upper tectonic plate is made up of weak, water-laden trench sediment accreted [stuck or locked] to the margin along thrust faults. The accreted sediment is not strong enough to fail in an earthquake (stick-slip behaviour) but, rather usually deforms without causing an earthquake.

Now research from the Japan shows that deep water section of the Tohoku region was fully
locked (accumulating strain at the convergence rate). The continental basement rock lies within
20 kilometres of the trench in deep water above the boundary at Tohoku. That created major accumulation of strain on the fault.

So when the earthquake occurred, there were large amounts of slip on the Tohoku megathrust, as well as corresponding movement on a deep water branch fault. Both contributed to the displacement of large volumes of water, creating the giant Japanese tsunami that smashed into the coast.

The Alaskan-Aleutian Subduction Zone is similar to the Tohoku region. The AASZ begins at a deep trench where the Pacific plate under thrusts the Alaskan continental arc and the Aleutian Islands oceanic arc.

Part of that subduction zone triggered the March 27, 1964 Good Friday magnitude 9.2 Anchorage, Alaska, megathrust earthquake. It was the largest quake ever recorded in North America and the second largest worldwide since seismic events were recorded. The epicentre was about 20 kilometres north of Prince William Sound, where a fault ruptured 25 kilometres below the surface. That quake causing major damage in Anchorage, 125 kilometres to the west and in Valdez 64 kilometres to the east. The megathursts along the ocean floor shifts created large tsunamis as high as 67 metres that struck along the North American coast from Alaska to California.

In Anchorage, nine people were killed by the quake, much of the downtown was destroyed and one neighbourhood lost 75 homes in a massive landslide. Two villages near Anchorage were destroyed when the land sank.

According to Wikipedia, the damage to British Columbia alone was estimated at $10 million in 1964 dollars (about $75 million in 2012 dollars according to the Bank of Canada inflation calculator) The Anchorage quake actually shook Kitimat and caused minor damage in the town. Due to factors such as the location of the quake at Prince William Sound , the tides and other factors along Douglas Channel, the tsunami coming into Kitimat was just a few centimetres high. Across the northwest and down the coast, there was more damage, the tsunami that hit Prince Rupert was 1.4 metres. Again to the configuration of the coast, tides and other factors, Port Alberni on Vancouver Island was hit twice, washing away 55 homes and damaging 375 others.

In California, 12 people were killed at Crescent City. There was damage in Los Angeles and as far off as Hawaii.

The study says that an Anchorage type event occurs every 900 years, so that area appears to be out of immediate danger,

According to the study, there was a magnitude 8.6 earthquake near Uninmak Pass in the same region in 1946 that triggered a tsunami that caused damage along the west coast, killed 150 people in Hawaii and inundated shorelines on South Pacific Islands and as far away as Antarctica. Another earthquake near the Andreanof Islands in 1957 also triggered a dangerous tsunami.

The new danger zone could be at the Semidi Islands, southwest of the better known Kodiak Island, where a 400 kilometre-long section of the subduction zone ruptured in 1938, causing a 8.2 magnitude earthquake. In the 1938 earthquake, the study says, that quake was beneath relatively shallow water, so it generated only a modest tsunami.

The Semidi Islands area is now fully locked, the study says, and enough strain has built up to trigger a similar event.

In 1788, a major earthquake in the Semidi Islands was recorded by Russian settlers. It is that area that the study says could trigger a Tohoku type tsunami. The segment of the trench in deeper water has not had a rupture since 1788. Satellite observations show that strain along the fault is accumulating “at a high rate.” The trench is four to five kilometres deep, just like at Tohoku, so displacement of the ocean water could trigger a similar giant tsunami.

Potential rupture of the near-trench section of the plate boundary is worrisome in that similar to the plate boundary near Tohoku, it is composed of rigid basement rock that extends beneath the margin to water depths of four to five kilometres. The presence of rigid basement rock close to the trench allows for an earthquake source beneath deep water, which would significantly amplify the height of the resultant tsunami. In addition, the possible additional rupture of an as yet undiscovered splay or branch fault, similar to circumstances during the Tohoku earthquake, would further increase the tsunami height.

The authors of the study call for more studies to compare the Aleutian area with the Tohoku region of Japan. Scientists are now working on “Paleotsunami studies” so there is a a history of tsunamis generated in the Aleutians that can be correlated to specific earthquakes.

Most of the attention on the west coast of North America has been centred on the Cascadia fault from northern California to southern British Columbia, which could also trigger a major earthquake and tsunami. It is time that scientists, emergency planners and government paid more attention to Alaska.

Link to Study Tsunami Hazards to U.S.  Coasts form Giant Earthquakes in Alaska  (pdf)

 


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What about the Northern Gateway?

My family was just sitting down for dinner in Kitimat on that Good Friday evening in 1964 when the whole house began to shake. The quake in Anchorage lasted for four minutes, the shock that hit Kitimat was probably less than a minute.

After dinner, tuning to the local TV station, CFTK, the Friday night broadcasts was interrupted by a news special, an extraordinary even for a small station, which in those days had no microwave communications with the rest of the television universe, with the local anchor telling the story based on wire service and other reports that were already trickling in, giving the people of the Kitimat-Terrace-Prince Rupert region the news of the devastation in Alaska.

Fast forward 48 years and the big question on the northwest coast is the Enbridge Northern Gateway pipeline and whether or not the pipeline and the terminals in Kitimat harbour are vulnerable to earthquake and tsunami.

In public presentations in Kitimat, Enbridge officials have always minimized the potential danger to the Northern Gateway from earthquake and tsunami. In its latest presentation, to District of Kitimat Council on April 16, 2012, Enbridge engineer Drum Cavers told council that “all of the major earthquakes have occurred well off shore on the Queen Charlotte Fault,” and that “seismic activity is low relative to south coastal BC.” Cavers also said “the Kitsumcalum-Kitimat Valley is not the site of unusual seismic events or faults.” The presentation points to an 1973 quake in the Skeena River valley that Enbridge says was small and the planned pipeline is within “seismic design parameters.”

Cavers’ presentation said “No fault breaks to surface are known near the pipeline route, but if one should be found during further work, there are methods to mitigate fault motion if required.”

There has been no mention by Enbridge Northern Gateway of the potential problems that could be caused to the Kitimat pipeline and the terminal by a major earthquake or tsunami from the Alaska Aleutian region.

I was out of town during Cavers’ presentation but I have asked questions about the 1964 quake and potential problems from Alaska at three public meetings, including a direct question to Northern Gateway president John Carruthers at the September, 2011, public forum at Kitimat’s Mount Elizabeth Theatre. Despite promises, Enbridge has so far not responded to my questions.

Not just energy: Asia’s demand for aluminum brings $2.7 billion upgrade for RTA Kitimat smelter

Aluminum642-jeansimon3.jpg
Rio Tinto Alcan president primary metals, Jean Simon, announces the go-ahead for the Kitimat Modernization Project at ceremony at the plant in Kitimat, Dec. 1, 2011.  (Robin Rowland/Northwest Coast Energy News)

 “It’s a go.”
 
 The “go” meant  that the Rio Tinto Alcan board had finally approved spending $2.7 billion for the long awaited Kitimat modernization project that would update the 60-year old aluminum smelter, increasing production capacity by 48 per cent to 420,000 tonnes a year.

Rio Tinto Alcan primary metal president Jean Simon  made the announcement Thursday, Dec. 1, 2011 to cheers at a theatre (converted from the dining hall) at the new construction camp at the Kitimat smelter.

That money is in addition to expenditures already approved, bringing the total investment in the modernization project to $3.3 billion  US.

“This will help us put Kitimat and Canada  at the forefront of  the 21st century global aluminum  industry,” Simon said. “It is a truly transformational project.”  He said it was in line with RTA’s long term strategic objective of long life, large scale, low cost assets. The project, Simon said, will take advantage of Rio Tinto Alcan’s competitive advantages: clean self generated hydro power and leading edge technology.

If all goes as expected, the first new metal will be poured in the first of half of 2014.

The new smelter will use a RTA proprietary smelting technology that reduce carbon dioxide emissions by 50 per cent.  
 
The long planned project had been put on hold in 2008 as the world weathered the financial meltdown.

 Kitimat mayor Joanne Monaghan  said at the ceremony, “This is something our community has been waiting a very long, long time for….Kitimat has suffered through some very had economic times over the last several years and this announcement means we have the certainty that the aluminum business will be here for the next 35 to 50 years… We’ve seen a lot of industry disappear from Kitimat over the past few year and its been hard on our community. In fact, with Methanex leaving, with Eurocan leaving I felt like the mayor of doom.  And then, all of a sudden, all of these things are happening. And I feel like the mayor of boom.

“We know the importance of that first initial investment to show that Kitimat is the strategic place to invest. And when RTA began its expansion, and its construction camp, then all of a sudden three LNG plants came on stream. We had a biomass plant ready to come in. So thank you Alcan for starting that whole trend for people coming into our community.”

It is Asia is fueling Kitimat’s new boom, and not just in natural gas, but also in aluminum.  When Kitimat was planned and built 60 and more years ago, Asia, China, Japan, Korea were in ruins, devastated by the Second World War.  Now it is Asia, and the short great circle route from Kitimat harbour to the market ports, that is one reason that the Kitimat modernization project was approved.

“Most of the aluminum is going into Asia. Korea, Japan and other countries,” Simon said in a post-ceremony news conference.  “We’ve been producing here for 60 years and Kitimat has always been recognized  as a very solid, reliable and good quality producer of aluminum so our customers from Asia are demanding the metal from Kitimat. So this is good news for them too.”

644-henning1.jpgPaul Henning, RTA vice president of BC operations, is not only a corporate manager. He was the very entertaining master of ceremonies for the announcement. (Robin Rowland/Northwest Coast Energy News).

Paul Henning, VP BC Operations and strategic projects Western Canada, was asked if Kitimat can handle the demand and possible bottle necks  with, as well as Kitimat modernization, three LNG projects, possibly the Enbridge Northern Gateway pipeline and perhaps other projects in the coming couple of years.

“The good news is that we’re first,” Henning said.  “The folks who grab the ball usually have a chance. We’re working with those folks.  People availability will be the key. I think there’s a lot of common sense going on, these are mega projects.  Mega projects need lots of people. I wouldn’t call it coordination, but there is an understanding.  They understand our timing, we understand their timing.   

“All being equal we’re not competitors.  It’s going to be an extended boom for the region. And of course, the projects are stacked, all trying to happen at the same time.

“It’s challenging,  just for resources and infrastructure. If they can be spread, it’s a win, win, win. At the end of the day  Our business drives what we do in the timing. Their business care drives their timing. At the end of the day, we’re first in.”

Thursday wasn’t the best day to show Kitimat off to the world, with a cold wind driving sleet, snow and rain all at the same time.  BC Premier Christy Clark’s plane was turned back from Terrace Kitimat airport and a second aircraft with RTA CEO Jacynthe Cote was redirected to Prince Rupert.

643-oldphoto2.jpg
RTA employees and guests watch a slideshow of historic photos of the early days of Kitimat before the official ceremony announcing the go-ahead for the Kitimat modernization project.  (Robin Rowland/Northwest Coast Energy News) 

As the audience and guests waited for the arrivals that were not to come, there was a slideshow of historic photos on giant LED screens, showing the early days of Kitimat, the construction of the dam, transmission lines, townsite and the potlines.

Then the elaborate ceremony began, with Paul Henning acting as master of ceremonies, introducing the Haisla Spirit of the Kitlope drummers before Simon made the “go” announcement.

It was good community relations that helped the RTA board give the go-head, Simon said.

“We will also honour the landmark Haisla Nation, Rio Tinto Alcan Legacy Agreement and are proud of this partnership to provide opportunities and training and that is resulting in increasing numbers of Haisla Nation members working on the project,” said Simon.

Haisla chief councillor Ellis Ross had been flying up with Christy Clark, so Councillors Henry Amos, Alex Grant and Keith Nyce were at the ceremony on behalf of the  Haisla.  “On behalf of the Haisla Nation, we offer you a warm welcome to our Traditional Territory. The Haisla Nation has worked very closely with RTA and supported the reality of this important and exciting decision. Together with RTA, our Nation is very proud of the legacy agreement we have reached.”  Nyce said.

The Haisla are not only our closest neighbours but our best friends,” Henning said at the news conference.  “It hasn’t always been like that. I think leadership from the Haisla, starting with Steve Wilson,  transferring to Ellis Ross. Ellis has taken it to another level.  The recognition of wanting to engage in the future was the key. We had to recognize and respect that past, to learn how to work together and build for the future.

“It’s actually a cohesive joint approach to  economic development and sustainability within the Haisla First Nation and the plant. It actually betters the plant because we have employees that live here, work here,  there are 120 Haisla folks who are working within the operation. That to me is sustainability in real time.”

Henning is also confident that the company will successfully negotiate a new contract with the Canadian Auto Workers local.  Henning said that 2007 contract was designed to get the company  through to first hot metal but then the financial crisis struck.”The good news gives us certainty.”Henning said. “We know what we have to drive for. We’ll get a contract, we’ll get a contract, we always do. Some are prettier than others.  The confidence from this is a great start.   The union were here today,  I am confident that we will get through and get a contract that really fits this program.”

After he took the podium, Michel Lamarre, director of the Kitimat Modernization Project joked. “We often say that when we get married, and it’s raining, the marriage is very strong and I think this is going to be the case for the KMP project.”  He said Kitimat management had made a very solid case for a very solid project to the RTA board.

645-lanarre.jpgMichel Lamarre, director of  the Kitimat modernization project, talks about the challenges of the next two years until first metal in 2014.  (Robin Rowland/Northwest Coast Energy News)

“We are building a state of the art facility which will be a jewel. This is something we can all be proud of… The next two years will be very busy and very exciting. Let’s build the project with zero harm, zero harm to the people who are building it and zero harm to the environment.”

The weather was just too nasty for an official ground breaking ceremony at the construction site, so it was moved indoors, with RTA executives and employees, the Haisla representatives and Mayor Monaghan turning the shovels into a ceremonial pile of dirt.

646-RTAgroundbreaking.jpg
The indoor groundbreaking ceremony marking the approval of the Kitimat modernization project. Left to right Michel Lamarre, director KMP,  RTA operations employee Ron Leibach, Brent Hegger, VP major projects, Kitimat mayor Joanne Monaghan, Jean Simon, RTA president primary metals, Paul Henning, VP BC operations and Henry Amos, Councillor, Haisla Nation.  (Dwight Magee/RTA)

Giant Japanese energy consortium buys into BC shale gas

Energy

A large Japanese consortium lead by Inpex Corporation has agreed to buy  a 40 per cent stake in shale gas assets owned by Calgary-based Nexen, an energy exploration company.

A Nexen news release calls the deal “a strategic partnership.”  The deal is worth $700 million and covers the development of shale gas deposits in the Horn River, Cordova and Liard basins in northeast BC

Inpex is a partner with Shell in an Indonesian liquified natural gas project. Shell recently purchased the old Methanex site and marine terminal in Kitimat.

Nexen will continue to manage operations at the deposits.
 

The news release quotes Marvin Romanow, Nexen’s President and Chief Executive Officer, as saying :”This joint venture represents a significant milestone in the advancement of our shale gas strategy and the premium over our invested cost shows the value we have created in a short time. The transaction provides us with world-class partners that have significant upstream and LNG expertise. It also recognizes the outstanding team we have put in place and the execution excellence they have consistently demonstrated.”

The Nexen release goes on to say:

Inpex currently conducts 71 oil and gas projects in 26 countries, making them Japan’s largest oil and gas exploration and production company. They are engaged in exploration, development and production activities around the globe with production of over 400,000 boe/d and have the largest oil and gas reserves and production volume of any Japanese E&P company.

Inpex brings significant LNG expertise and market access to the partnership. They own interests in large LNG projects including resource in both Indonesia and Australia and are building a regasification terminal in Japan. Inpex holds a 76% working interest in the Ichthys LNG project offshore Australia and is the operator. The project is expected to deliver LNG production volumes of 8.4 million tonnes per year. Inpex holds a 60% working interest in the Abadi LNG project offshore eastern Indonesia and is the operator (in July 2011, Inpex signed an agreement with Shell for transfer of a 30% participating interest. This transaction is subject to certain conditions). The project is expected to deliver LNG production volumes of 2.5 million tonnes per year. The production volume from these two projects is equivalent to 15% or more of Japan’s current LNG annual import volumes.

Energy industry tweeters are already speculating that the natural gas will likely be exported through Kitimat.

Russian sail training ship tracks Japanese tsunami debris crossing the Pacific

Environment Oceans

591-palada.jpgThe Russian sail training vessel STS Pallada. (Pallada)

Ever since the March 11 earthquake and tsunami that devastated parts of northeastern Japan, scientists have been using computer models to track the debris that was swept out to sea by the waves.

Now a Russian sail training vessel has found the debris in mid-Pacific nearing Midway Island.

The STS Pallada was on a sail training mission when the officers and crew became aware of the computer models created by the International Pacific Research Center  at the University of Hawai at Manoa. So on its way home from Honolulu to Vladivostok the ship went looking for the debris.

The IPRC has now posted some excerpts from the Pallada’s log, as transmitted by  Natalia Borodina, the Pallada Information and Education mate.

Sept.  22 in position 31.42.21 N and 174.45.21 E we picked up on board the Japanese fishing boat.  Radioactivity normal, we’ve checked it with the Geiger counter. At approaches to the mentioned position  (maybe 10-15 minutes before)  we also sighted a TV set, fridge and a couple of home appliances.

Sept. 27 We keep sighting every day things  like wood boards, plastic bottles, buoys from fishing nets (small and big ones). an object resembling a wash basin, other wastes.  All these objects are floating by the ship.

With the data provided by the Pallada, the scientists in Hawaii are reviving the computer models of the debris drift.  They expect the debris to reach Midway sometime this winter. Some debris  will  reach the main Hawaiian Islands and eventually the west coast of North America.

593-mapdebris-thumb-500x273-592.jpgA map of the tsunami debris field by Nikolai  Maximenko and Jan Hafner of  IPRC. The line shows the track of the Pallada where the debris was spotted between  Sept. 21 and Sept. 28, 2011. The red rhombus (diamond)  marks the location where the Japanese boat  was found. The red circle  denotes maximum debris density spotted by the Pallada. The purple shows the extent of the debris field from the updated university computer model as of Sept. 25. Click for larger image. (IPRC)

595-recovery.jpgThe crew of the Pallada hoists on board a Japanese boat, registered in Fukishima prefecture, and presumably washed out to sea during the March 11, 2011 tsunami. (Pallada)

IPRC/ Pallada news release  (pdf)

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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….

China biggest customer for Kitimat LNG: Encana

Energy

564-ecanalogo75.jpgChina 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

559-chinalng.jpgDave 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.

561-kitimatlngmarket.jpgThe 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.

563-lnghub.jpgEncana 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.

Related links

Dow Jones (via Fox) Encana Eyes Asia As Key Market For B.C. Natural Gas

CP (via Canadian Business) Encana says costs of labour, steel, services rising in energy sector

Links: World hunger for LNG on the rise

Energy Links

Alberta Oil
The clock is ticking on West Coast LNG shipments Nuclear outages in Japan stoke Canadian export plans

The uptick in LNG consumption is potentially good news for a suite of liquefaction plants taking shape on the northwest coast of British Columbia. Japan is one of several potential sales targets for the Apache Canada Ltd.-led Kitimat LNG project, which is currently awaiting approval from the National Energy Board to begin shipping five million tonnes of the stuff annually from a new facility at Bish Cove. Liquefied gas costs spiked 33 per cent after the March 11 quake, Bloomberg reports, and they may rise higher yet.

Competition will be stiff. Canadian forays into LNG will rub shoulders with the likes of ExxonMobil, BG Group Plc and Qatargas, among others, who are likewise clamoring to deliver chilled gas to a power market in need. Just 16 of the country’s 54 reactors were online last month, according to the International Energy Agency. (That’s no small figure, as the atom currently meets 27 per cent of the island’s electricity needs).

Financial Post
LNG on the rise

Liquefied natural gas prices are surging to a three-year high as demand from Japan, China and India outpaces supply increases, boosting sales for producers from BG Group Plc to Exxon Mobil Corp….

North America may export about 5 billion cubic feet a day of LNG, or roughly the combined LNG export capacity of Nigeria and Algeria, globally by 2017 from projects that turn surplus gas from shale-rock formations to LNG for shipment to customers in Asia and Europe, according to the Eurasia Group, a New York- based consultant. That’s about half of the six proposed developments by companies including Cheniere in the U.S. Gulf Coast and British Columbia.

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.

Japanese utilities using record amounts of LNG: Reuters

Energy

Japan utilities’ LNG usage hits record high in August

Japan’s 10 utilities consumed a
record 4.81 million tonnes of liquefied natural gas in August,
up 15.4 percent from a year earlier, industry data showed on
Tuesday, as they burned more gas to offset a fall in nuclear
power generation.