Liquefied natural gas | Northwest Coast Energy News

Alaska Governor Governor Sean Parnell met with the chief executive officers from BP, ConocoPhillips and Exxon Mobil on January 5, 2012, to discuss alignment between the three companies on commercializing the North Slope’s vast natural gas reserves.

A news release from the governor’s office says Parnell asked “the three companies – the major lease holders for natural gas reserves on the North Slope – to work together on developing a liquefied natural gas (LNG) project that focuses on exporting Alaska North Slope gas to Asia’s growing markets.”

The release says that governor is targeting LNG exports to Asia to serve the growing demand for natural gas. That would make an Alaska LNG export terminal a rival to the three projects at Kitimat and another proposed project in Oregon.

Parnell and the CEOs – Bob Dudley of BP, Jim Mulva of ConocoPhillips and Rex Tillerson of Exxon Mobil – met for two hours. During the meeting, the governor’s release says, the CEOs briefed the governor on the extensive work they’ve been doing in response to his request. After meeting with the governor, the three CEOs briefed members of the Alaska state legislature.

Alaska governor meets with Energy CEOs — Governor Sean Parnell met in Anchorage Jan. 5, 2012, with the chief executive officers from BP, ConocoPhillips and Exxon Mobil to discuss alignment between the three companies on commercializing the North Slope’s natural gas reserves.(Alaska governor's office)

“I appreciate the willingness of the chief executives to come to Alaska to discuss the important topic of commercializing North Slope gas,” Parnell said. “For a gas project to advance, all three companies need to be aligned behind it. This meeting is an important step, but much work remains.”

The Associated Press reports that Parnell wants the companies to unite under the framework of the Alaska Gasline Inducement Act, which gave TransCanada Corp. an exclusive state license to build a pipeline and up to $500 million in state incentives.

AP says TransCanada has been working with Exxon Mobil to advance the project but has yet to announce any agreements with potential shippers.

TransCanada has focused most of its attention on a pipeline that would deliver gas to North American markets through Alberta to Canada and the Lower 48 states. TransCanada has also proposed a smaller pipeline that would allow for liquefied natural gas exports through a terminal at the oil export port of Valdez. A rival project, a joint effort of BP and ConocoPhillips that also would have gone through Canada, folded last year.

The Alaska Journal of Commerce reports BP and ConocoPhillips believe a major liquefied natural gas project is the best option for marketing North Slope gas, quoting the chief executive officers of the two companies Robert Dudley of BP and James Mulva of ConocoPhillips.

“Given the outlook with shale gas in the Lower 48, it looks like LNG has the best potential. We’re not saying the pipeline (to Canada) is impossible,” but a pipeline to southern Alaska to an LNG plant appears to have the best prospects, BP CEO Dudley told reporters following the meetings with Parnell and legislators.
ConocoPhillips’ Mulva agreed with Dudley. “We believe LNG is the best alternative for North Slope gas, far better than any alternatives,” Mulva said.

Oregon moves to block Jordan Cove LNG project

Energy LNG Politics

The state of Oregon has filed a motion with the US Federal Energy Regulatory Commission (the American equivalent of the National Energy Board) to block, perhaps temporarily, the Jordan Cove Liquified Natural Gas project at Coos Bay, Oregon.

Experts at the June NEB hearings in Kitimat testified by the Jordan Cove could be Kitimat’s chief rival as an LNG terminal.

Like the plans for Kitimat in the early 2000s, the Jordan Cove facility was originally planned as an import terminal and the FERC eventually did issue a permit for the construction of the import terminal.

In the meantime, the natural gas market changed, with the growth in the hydraulic fracturing to retrieve gas from shale deposits. In September, the company involved, Jordan Cove LP applied to the Department for authorization to export natural gas. At the time the company said it intended to ask the Commission in early 2012 to amend its existing authorization to add export facilities.

On Dec. 2, 2011, the Oregon Dept. Of Justice filed a motion with the FERC to revoke the approval of the LNG terminal in Coos Bay and reopen the record so the state can submit evidence that a revised terminal proposal is not in the public interest.

Oregon wants the company to file a new application, arguing that is more appropriate than amending of the import application.

The filing says: “The facts demonstrate a change in core circumstances that goes to the very heart of the case. The heart of this case is whether the Jordan Cove LNG import terminal is in the public interest and the pipeline is required by public convenience and necessity….

Oregon wonders how the “additional imported natural gas supply” would benefit the state and how that would outweigh “the adverse impacts on private landowners and the environment.”

Oregon says that “any benefit that may have existed when the import Project was proposed, no longer exists to offset the adverse impacts of the Project.”

The filing also argues that if the United States exports natural gas through Oregon that will increase domestic prices. It also argues that there hasn’t been enough consideration about the environmental impact of the liquefaction facility.

“This is the right thing to do, to tell them we don’t accept this bait and switch with Jordan Cove,” said Dan Serres, an organizer with the conservation group Columbia Riverkeeper, told the Oregonian newspaper.

Bob Braddock, project manager for Jordan Cove, told the Oregonian he wasn’t surprised by the filing, claiming that Oregon Attorney General John Kroger has made no secret of his opposition to any LNG terminal since before he took office

Braddock repeated arguments familiar to northwest BC from both the LNG and Enbridge Northern Gateway projects, saying the public interest in the pipeline and export terminal includes jobs, tax revenue and pipeline interconnections that would bring a better gas supply to southern Oregon.

A few days earlier, on Nov. 22, the U.S. Fish and Wildlife filed a letter with the FERC, saying it was not being kept up to date about changes in plans by Jordan Cove for the LNG terminal and so could not fully assess the environmental impact. The letter said the project’s mitigration plan had not been provided in sufficient detail and assurance about theit nature, location, effects and implementation. The Fish and Wildlife Service also noted that the company had not addressed or supplied information on the impact the LNG project might have on the program to help the recovery of the Northern Spotted Owl population. In fact, according to the Fish and Wildlife filing the plans were so inadequate that it wasn’t possible to begin formal consultations with company over environmental impacts.

Opponents of the project note that Oregon will probably have the final say on the project, since the terminal location is on state-owned land and the state must approve the leases.

Oregon motion to FERC to set aside order (pdf)

Fish and Wildlife Jordan Cove letter (pdf)

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.

Shell’s LNG terminal plans “substantially larger” than rivals: Globe and Mail

The Globe and Mail reports Shell eyes LNG terminal in B.C. that would overshadow Kitimat

A group of major international energy partners led by Royal Dutch Shell PLC is contemplating an LNG export terminal for the British Columbia coast that is substantially larger than a rival’s project that could soon begin construction.

Shell, which has teamed with Korea Gas Corp., China National Petroleum Co. and Mitsubishi Corp., is looking to load 1.8 billion cubic feet a day of natural gas onto tankers bound for Asian markets, officials with Spectra Energy Corp. ) revealed Tuesday.

The Globe and Mail says Spectra spokesman Peter Murchland said Shell project would generate 1.8 billion cubic feet of natural gas a day, That compares to the 1.4-billion cubic feet a day proposed by Kitimat LNG,

PetroChina likely to join Kitimat project, Shell CFO tells Bloomberg

Energy

Eduard Gismatullin, a London-based reporter for Bloomberg News reports in Shell, PetroChina May Ship Canadian LNG to Gain From Asia Prices that:

Royal Dutch Shell Plc, Europe’s largest oil company, together with PetroChina Co. and Japanese and South Korean partners are examining plans to ship liquefied natural gas from Canada’s west coast to Asia.

“This gives us a chance to arbitrage the price differential between $4 gas in North America and with what in the last quarter was around $15 gas prices in Asia,” said Shell Chief Financial Officer Simon Henry. ‘It’s highly likely” that PetroChina will be a partner in the project following collaborations with Shell in Australia and China.

Business and labour leaders show their support for northern pipeline initiatives: Vancouver Sun

Energy Economy

Gordon Hamilton in the Vancouver Sun writes Business and labour leaders show their support for northern pipeline initiatives

Sixteen business and labour leaders have signed an open letter to British Columbians urging their support for natural gas and oil pipeline proposals across the northern half of the province which they say are needed to link Canada’s energy resources and B.C.’s economic future more closely to Asian economies.

The letter marks the first public relations campaign aimed at swaying opinion province-wide towards energy projects in the North. Up until now, only regional support groups have been formed, such as the Enbridge Northern Gateway Alliance, which is actively supporting Enbridge’s $5.5 billion Alberta-to-Kitimat pipeline project in communities along the pipeline route.

The letter was written by former federal transportation minister Chuck Strahl. Signatories include former international trade minister David Emerson, the B.C. and Yukon Territory Building and Construction Trades Council, the Business Council of B.C., the Vancouver Board of Trade and the Canadian Manufacturers and Exporters the country’s largest industrial association.

Washington State proposes converting ferries to LNG

Energy

The Seattle Times reports Plan would convert ferries to liquefied natural gas

A proposal to convert six Washington state ferries to liquefied natural gas could save nearly $10 million a year, consultants have told top Washington legislators.

The conversions of the Issaquah-class ferries would cost $65 million, but consultant Cedar River Group said the money would be paid back in seven years through fuel savings.

The six ferries have a life expectancy of 30 more years…

If the state were to convert the six Issaquah-class ferries built in the 1980s — the Cathlamet, Chelan, Issaquah, Kitsap, Kittitas and Sealth — they would be the first ferries fueled by liquefied natural gas in the nation.

Shell’s go slow approach to Kitimat LNG project means little action before 2015

Energy Environment

When Royal Dutch Shell Canada purchased the Methanex/ Cenovus Energy plant and marine terminal in Kitimat Wednesday, company spokesman Paul Doolan told the media that Shell “is now exploring the potential for an LNG export terminal on the site,” but refused to give any time line for the project.

Now sources have confirmed to Northwest Coast Energy News that at this time it looks as if there will be no major developments in the Shell project until 2015.

Employees of Cenovus were told after the sale announcement that the plant’s condensate operations would be “business as usual” until sometime in 2015.

(After the sale, Cenovus told the media it doesn’t expect changes in
the regular shipments of condensate to change “for the foreseeable
future.” )

As anyone who has gone through a takeover or similar management transition knows, a company’s new management may have ideas that they haven’t discussed with the old regime.

The 2015 date is logical, however, since 2015 is the projected launch date for the first project, KM LNG partners’ Kitimat LNG project.

There are already two projects in the “pipeline” so to speak, the Kitimat LNG and BC LNG projects. As discussions during the June National Energy Board hearings that led to the approval of the KM LNG export licence last week showed, the two companies must come to an agreement on some of the pipeline capacity coming into Kitimat, sharing “the molecules,” that favourite phrase of natural gas analysts.

Shell will also have to go through the National Energy Board process for granting an export licence.

With energy companies rushing to exploit the shale gas resources in northeastern BC and in Alberta. and growing demand for the natural gas in Asia, transportation of the natural gas is a big question, since it appears Shell and its partners will have to build new pipelines since the existing pipelines into the Kitimat region will be at full capacity.

Where will that new pipeline be built? How will that new pipeline be built? That question is already being widely debated in Kitimat. Ever since Enbridge has announced that it too is interested in joining the natural gas export boom, the question has been: could a natural gas pipeline replace the proposed Northern Gateway bitumen pipeline or does Enbridge intend to build two pipelines? If it is the latter, Enbridge, and possibly Shell, can expect years of hearings, protests and delays because while people in northwestern BC are generally accepting of natural gas projects, there is fierce and still growing opposition to the bitumen pipeline.

Shell confirms purchase of Methanex site, marine terminal, in Kitimat for LNG project

Energy

The former Methanex site is seen the red square in this map of the Kitimat service centre prepared by Enbridge as part of its Northern Gateway pipeline proposal and filed with the Joint Review panel. The yellow line is the proposed Enbridge bitumen pipeline. The dark red line is the proposed pipeline that would feed the Kitimat LNG and likely the BC LNG projects, where the red pipeline route has white, that is the Pacific Trails Pipeline. See How Kitimat harbour will look if both Northern Gateway and KM LNG go ahead.

Updated Oct. 20, 2011, 0955

Kitimat mayor Joanne Monaghan has confirmed that Royal Dutch Shell has purchased the former Methanex site in town, “as a first step toward a proposed Liquified Natural Gas facility in Kitimat.”

Monaghan said she met with Shell executives on Wednesday afternoon, when the long rumoured purchase of the Methanex site was confirmed.

Thursday morning, Shell spokesman Stephen Doolan said that the company and its partners
also acquired the Kitimat Marine Terminal. Shell’s partners include Korea Gas Corp, Mitsubishi Corp and China National Petroleum Corp, Doolan said.

Both sites were owned by Cenovus Energy which purchased them in 2010 from Methanex for a reported $40 million.

Monaghan also said that the Shell officials said the company will not be making an announcement of the details of their plans for another few weeks.

If the Shell project goes ahead, it will be the third liquified natural gas project in Kitimat.
The others are KM LNG partners’ (Apache, Encana and EOG) Kitimat LNG plant at Bish Cove and the smaller project from BC LNG.

The Methanex plant on the Kitimat river permanently ceased methanol production November 1, 2005. Methanex currently uses the Cenovus terminal in Kitimat to import
methanol to supply customers in western Canada. Cenovus uses the terminal and site to process condensate, used to dilute bitumen, that arrives by ocean tanker and then is shipped by rail to Alberta.

The future of condensate operation has been in doubt since the announcement of the Enbridge Northern Gateway project, since it was expected that the Cenovus condensate operation would have been absorbed into the Enbridge operation.

If the Methanex/Cenovus site is converted to a full LNG facility, current operations will have to be decommissioned first, Monaghan said.

Multiple sources in Kitimat have been saying for the past month that Shell had purchased the Methanex site, but official conformation only came from the mayor late Wednesday.