KM LNG | Northwest Coast Energy News

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….

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.

Gitxaala First Nation settles with KM LNG

Energy

The Gitxaala First Nation has settled its dispute with the KM LNG (also known as Kitimat LNG) over it’s application before the National Energy Board for an export licence.

A letter from Robert Janes, representing the Gitxaala, was filed with the NEB on Sept. 29, saying they were withdrawing their intervention and their motion for further hearings.

In original filings, the Gitxaala First Nation objected to a lack of consultation between the Crown and the First Nation as well as expressing concerns about the in adequacy of the Transport Canada TERMPOL process which is looking at the environmental and socio-economic effects of tanker traffic on the west coast. (TERMPOL is also part of the Enbridge Northern Gateway application).

One of the concerns of the Gitxaala that came in out in the June hearings in Kitimat was the effects of tanker wake on the coast. Janes’ cross-examination of the KM LNG witnesses was one of the liveliest part of the Kitimat hearings.

No details of the settlement were released.

Encana conference call to update Kitimat, Horn River developments

Energy

Encana, one of the three partners in the KM LNG (Kitimat LNG project) will hold a conference call for executives and a simultaneous webcast, Tuesday, Oct. 4 at 9 a.m. MT, 8 a.m. PT to update on its Horn River shale gas development and also Encana’s view of the Kitimat project. Encana’s partners are Apache Corp. and EOG.

A news release from Encana says

Encana Corporation (TSX, NYSE: ECA) will hold a conference call and
webcast for the investment community highlighting its Horn River
resource play on Tuesday, October 4, 2011 at 9:00 a.m. MT (11:00 a.m.
ET). The presentation will be hosted by members of Encana’s senior
management team and will include information detailing the company’s
strategy, resource play hub development model and operations in the Horn
River play, as well information on the Kitimat LNG project.
A live webcast of the conference call will also be available via Encana’s website, www.encana.com, under Investors/Presentations & events, or directly at the following

URL:

Webcast link:
http://w.on24.com/r.htm?e=361512&s=1&k=56F984CEC6C224CE4C59E3D7FE8C9CB8

The Calgary Herald is speculating that Encana may be either selling some assets or announce that it has found development partners. For those in the know in the Alberta oil patch the sudden announcement has people in Calgary wondering what the announcement will be.

The Herald also quotes one analyst as wondering what is holding up the Kitimat LNG project.

Phil Skolnick of Canaccord Genuity said he’s hoping for “some clarity” on where the company is at in the joint venture process, as well as what’s preventing Kitimat LNG from moving full-steam ahead.

“What are the essential bottlenecks?” Skolnick wondered

Editor’s note:
With all the activity around town it’s certainly a surprise to hear the Kitimat project isn’t going “full steam ahead.” As far as Northwest Energy News is concerned if there were bottlenecks on the project at this end, the ever vigilant Kitimat rumour mill which has been churning another possible LNG project for more than a week now, would certainly have heard about it. Perhaps it is simply all the unusually stormy weather we’ve been having all summer has slowed things down.

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.

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.

How Kitimat harbour will look if both Northern Gateway and KM LNG go ahead

Detail of a map filed by Enbridge Northern Gateway with the Joint Review Panel showing the foot print of the proposed bitumen terminal and the LNG terminal. The proposed BC LNG terminal would add a third terminal at North Cove (green text on this map)

A recent filing by the Enbridge Northern Gateway project with the Joint Review Panel shows just what Kitimat harbour and the service area will look like if the liquified natural gas projects go ahead and so does the Northern Gateway.

Three maps show areas where the two pipelines follow the same routes and where they diverge beginning just east of the service centre. (Larger versions of maps pop up if you click your mouse)

In this map, the Enbridge pipeline is yellow with a black outline, the LNG pipeline is red. Where there are yellow and red alternating squares, that means the two pipelines will follow the same route. Solid orange lines are paved roads,broken orange lines are unpaved roads and the green lines are power lines.

Just before the pipelines reach the service centre, they diverge, the yellow Enbridge pipeline following the road route around the periphery of the service centre, while the gas pipeline at first follows the route of the Pacific Trails Pipeline and then snakes off at the hydro substation. The two pipelines then run parallel just off Haisla Boulevard across from the Rio Tinto Alcan plant. The green line beside the two pipelines marks a hydro line that would be build to power the facilities.

The final map shows the Enbridge pipeline coming into the bitumen/condensate terminal with its large footprint, while the natural gas pipeline continues, crosses Bish Creek and then enters the Bish Cove KM LNG terminal. If the BC LNG terminal is built at North Cove, just west of the proposed Enbridge Northern Gateway facility, a branch pipeline would go from the main gas pipeline down to that facility. (There were indications at the June NEB hearings that negotiations were under way on “sharing” gas “molecules” between the two groups).

Footprint of the Enbridge Northern Gateway plant.

Enbridge photo maps showing Northern Gateway and LNG routes in pdf format

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.

Louisiana governor announces LNG project; size, cost would rival Kitimat

Energy

The governor of Louisiana, Bobby Jindal today announced that the state could be the site of what he calls the “one of the first natural gas liquefaction
facilities in North America.”

The facility will be built by Cheniere Energy which already has a terminal at Sabine Pass in Cameron Parish in the state.

Cheniere says it will spend $6 billion to
expand its existing facility, which will be one of the largest capital
investments in Louisiana history.

That means the Louisiana terminal could rival Kitimat in size and potential. The projected timeline for both shows construction and operational startup would happen at the same time.

A news release from the governor’s office says

The new project will create 148 new jobs and retain 77 existing jobs,
with a total compensation and benefits package that will exceed an
average of $100,000 a year. The new jobs will support another 589
indirect jobs in the area and 3,000 construction jobs will be created by
the project at the peak of construction activity. Cheniere will build
its new facility near the Louisiana-Texas border in Cameron Parish to
handle the shipment of liquefied natural gas (LNG) from the company’s
international LNG terminal.

Gov. Jindal said, “Cheniere Energy’s
construction of one the country’s first liquefaction facilities at the
Sabine Pass terminal in Cameron Parish is a huge win for our state. This
multi-billion dollar investment will be one of the largest capital
investments in the history of Louisiana, and build on our incredible
record of job creation projects all across the state. Cheniere’s
facility will grow our economy, increase natural gas production and
become a major exchange in continuing to meet the demand for energy
around the world.”

“The construction of Cheniere’s Liquefaction
Project in Cameron Parish will provide key support to Louisiana’s
economy and natural gas industry, which has been transformed by the
development of the Haynesville Shale,” said Charif Souki, Chairman and
CEO of Cheniere. “In only two years, Louisiana’s natural gas production
has doubled as the Haynesville has grown into one of the most prolific
shale plays in the world. Our Liquefaction Project will provide
thousands of jobs in Southwest Louisiana while connecting the state’s
natural gas industry to global markets, making Louisiana the world’s
first dual importer and supplier of LNG. We greatly appreciate the
support that Cheniere has received from the State of Louisiana and the
people of Cameron Parish, who have demonstrated a strong commitment to
our Sabine Pass LNG terminal.”

Cheniere Energy anticipates beginning
construction of the facility in early 2012. Hiring of the new permanent
jobs will begin in 2014 and the facility will commence operations in
2015. The final phase of the project is expected by the end of
2018.Adding liquefaction capabilities will transform the Sabine Pass
terminal into a bi-directional facility capable of exporting LNG in
addition to receiving LNG for regasification.

The Louisiana facility would use gas from the Haynesville Shale which is a Jurassic formation on the Texas-Louisiana border. Shale gas that would come through Kitimat comes largely from northeast British Columbia, especially the Horn River Basin.

Both the Kitimat and Louisiana projects are scheduled to begin main construction in 2012 with operations starting in 2015.

The KM LNG facility would have an initial plant capacity of 5 million metric tons per annum (mmtpa) with potential to expand to 10 mmtpa or more. The Louisiana release does not give a figure for the capacity of the plant.

During the recent National Energy Board hearings on KM LNG’s application for an export licence, witnesses repeatedly stressed there could be potential rival export ports for northeast BC shale gas in the United States, mainly in Oregon or Washington states, if the licence was not approved or the conditions were too restrictive. The Louisiana terminal would not likely be a rival for Kitimat for northern shale gas, although as the witnesses at the NEB hearings always stressed there is no way of tracking the origin of the “molecules” in the integrated North American pipeline network.

Governor Bobby Jindal’s news release