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Kitimat LNG, Rod and Gun to consult on “legacy” fish and wildlife program at Bish Cove: NEB

Bish Cove, site of the KM LNG (Kitimat LNG) natural gas terminal, photographed on a stormy Sunday, Sept. 18, 2011. (Robin Rowland/Northwest Coast Energy News)

KM LNG (also known as Kitimat LNG) will consult with the Kitimat Rod and Gun club about creating a “legacy” fish and wildlife program at Bish Cove, according to the National Energy Board decision that granted an export licence for liquified natural gas to the partnership.

As part of its consideration of the social, economic and environmental aspects of the project, the NEB noted:

The Kitimat Rod and Gun Association requested that KM LNG and its partners establish a fish and wildlife “legacy” program for the area. In response, KM LNG committed to working with the Kitimat Rod and Gun Association to explore a partnership and stated it and its partners are committed to investing in the communities where KM LNG operates. KM LNG noted it already supported some community initiatives and would set aside funds to support others, after a positive investment decision.

KM LNG has hired the energy services company KBR to do a front end engineering and evaluation study of the project which is expected to be completed in December. The partners will then make the decision whether or not to go ahead with the project.

Mike Langegger of the Kitimat Rod and Gun, who made the presentation to the hearings in June, says the club has had some preliminary talks with the KM LNG public relations staff but so far there have been no formal talks about the legacy program.

In its presentation to the NEB, Kitimat Rod and Gun said it would ask KM LNG for a legacy fund that would be $7.25 million over the twenty-year period of the export licence. The money would be used to preserving fish, wildlife and habitat in the area around the natural gas terminal

Langegger says while it is uncertain if KM LNG will agree to the complete proposal, no matter what the outcome he wants all stake holders to be involved, with they are “consumers” (hunters and anglers) or “non-consumers” (naturalists) so that the habitat is maintained.

NEB decision on KM LNG application(PDF)

Kitimat Rod and Gun submission to NEB (PDF)

NEB approves KM LNG export licence

Energy

The National Energy Board has approved KM LNG’s (also known as Kitimat LNG) application for an natural gas export licence.

A NEB news release says:

The National Energy Board (NEB or the Board) today approved an application by KM LNG Operating General Partnership (KM LNG) for a licence to export liquefied natural gas (LNG) from Kitimat, British Columbia to markets in the Asia Pacific region.

The export licence authorizes KM LNG to export 200 million tonnes of LNG (equivalent to approximately 265 million 10³m³ or 9,360 Bcf of natural gas) over a 20 year period. The maximum annual quantity allowed for export will be 10 million tonnes of LNG (equivalent to approximately 13 million 10³m³ or 468 Bcf of natural gas).

The supply of gas will be sourced from producers located in the Western Canada Sedimentary Basin. Once the natural gas has reached Kitimat by way of the Pacific Trail Pipeline, the gas would then be liquefied at a terminal to be built in Bish Cove, near the Port of Kitimat.

The construction and operation of the pipeline and the terminal will require provincial regulatory decisions.

This is the first application for an LNG export licence that the Board has considered since the de-regulation of the natural gas market in 1985.

In approving the application, the Board satisfied itself that the quantity of gas to be exported does not exceed the amount required to meet foreseeable Canadian demand. The exported LNG will not only open new markets for Canadian gas production, but the Board believes that ongoing development of shale gas resources will ultimately further increase the availability of natural gas for Canadians.

Prior to approving the licence, the Board considered environmental and related socio-economic effects of KM LNG’s application. These effects included matters related to marine shipping, and the proposed LNG terminal and Pacific Trail Pipeline.

The Board also acknowledges the potential economic benefits associated with KM LNG’s project. These benefits include employment opportunities due to the development of the LNG terminal and the Pacific Trail pipeline.

Kitimat mayor Joanne Monaghan said, “I am glad they got it, because now the project can move forward.”

KM LNG is owned by Apache Canada Ltd. (40 per cent), EOG Resources Canada Inc. (20 per cent) and Encana Corp. (20 pre cent). The Front End Engineering for the LNG terminal at Bish Cove is now underway. The companies say a final investment decision will be made in early 2012.

A news release from Apache said:

“The Kitimat LNG project represents a remarkable opportunity to open up Asia-Pacific markets to Canadian natural gas and we’re leading the way in being able to deliver a long-term, stable and secure supply to the region,” said Janine McArdle, Kitimat LNG President. “This export licence approval is another major milestone for Kitimat LNG as we move forward and market our LNG supply. LNG customers can have even more confidence in a new source of supply.”

“Today marks a historic day for Canada’s natural gas industry and this is fantastic news for our project and the communities where we operate. Kitimat LNG will bring revenues and jobs and the associated benefits to Canada,” said Tim Wall, Apache Canada President. “The Kitimat LNG partners are very pleased with the NEB’s approval of our export licence and we’d like to thank them for their support and confidence in the project.”

Text of NEB Decision on KM LNG(pdf)

Kitimat LNG on the agenda at Houston conference

Energy

The Kitimat LNG projects have been added to a conference on LNG exports in Houston, Texas on December 1.

Zeus Events, the commercial organizer of the conference tweeted this morning “Kitimat #LNG Export project added to N. American LNG Exports conference.”

The conference agenda describes the presentation this way:

Kitimat LNG Export Project Update
Kitimat LNG Project, Speaker TBA

Apache is developing the most advanced LNG export project in North America at Kitimat, British Columbia. Construction is expected to begin in early 2012, with operations to start in 2015. The representative has been asked to describe the project and provide an update, discussing what it will mean for British Columbia gas producers.

The conference website describes it as:

Proposals to liquefy and export North American gas as LNG have grown more numerous and controversial since our 2010 conference. At last count, ten liquefaction and export projects have been proposed on both coasts of North America. Analysts warn, however, that the United States is preparing to export its clean, abundant natural gas to countries like China, where it will be used for transportation fuel, while the U.S. will continue to import high-cost crude for its transportation.

This year’s conference will expand on our 2010 meeting to address political issues such as FERC’s willingness to approve export plant construction permits as well as examine new proposals. Costs, political hurdles and regulatory issues will be discussed.

The Oregon projects, seen by analysts at the June National Energy Board hearings as Kitimat’s chief rival are also on the agenda at the conference.

US, European companies looking at LNG powered ships

Energy Environment Shipping

As one ship is grounded off New Zealand, causing an environmental “catastrophe” and a second is grounded off Nova Scotia, a shipping company in New Orleans has announced that it will commission two vessels powered by a duel fuel system that includes liquified natural gas.

Harvey Gulf International Marine of New Orleans, Louisiana and Trinity Offshore of Gulfport, Mississippi said Friday it will build two offshore 92 metre (302 foot) supply vessels, with a price tag of $55 million each with an option for a third. These vessels will service the oil and gas rigs in the Gulf of Mexico.

New Orleans City Business report

The vessels will also have environmental features to meet US ENVIRO+ Green Passport Certification by the American Bureau of Shipping.

The ship’s propulsion system will be built by a Finnish company called Wärtsilä, which specializes in natural gas power plants on land and integrated marine engine systems, as well as designing ships, including large ferries.

Wärtsilä

In a news release, John Hatley, a vice president of Wärtsilä North America remarked that “We are witnessing a transformation of the marine industry as it charts a course towards a new era for natural gas. It’s exciting for Wärtsilä to be a trusted partner in this launch with industry leader Harvey Gulf, whose natural gas supply vessel investment actions of today signal a coming paradigm shift. This is aimed at capturing operational savings while simultaneously reducing emissions.”

The company website says it supplies power systems for LNG carriers as well as container vessels, bulk carriers, drilling rigs and ships, offshore research vessels, floating production units, cruise ships and yachts.

The duel fuel system combines conventional marine fuel systems, gasoline, light fuel, heavy fuel or biofuel with liguified natural gas.

European shipping companies are adopting the duel fuel technology to meet emission standards that come into effect 2013.

Wärtsilä

The website says

This dual-fuel capability means that when running in gas mode, the environmental impact is minimized since nitrogen oxides (NOx) are reduced by some 85 per cent compared to diesel operation, sulphur oxide (SOx) emissions are completely eliminated as gas contains no sulphur, and emissions of CO2 are also lowered. Natural gas has no residuals, and thus the production of particulates is practically non-existent.

The shipping industry finds the operational savings that gas offers to be very compelling. Similarly, the significant environmental benefits that LNG fuel provides are of increasing importance. With fossil fuel prices, and especially the cost of low sulphur marine fuel, likely to continue to escalate, gas is an obvious economic alternative.

Two-stroke engine

On September 23, Wärtsilä, announced that it is now working on a two-stroke liquified natural gas engine. The website says:

Wärtsilä… has successfully tested its new low-speed gas engine technology in trials conducted at the company’s facilities in Trieste, Italy….
Wärtsilä successfully demonstrated that the engine performance fully complies with the upcoming IMO Tier III nitrogen oxide (NOx) limits, thereby setting a new benchmark for low-speed engines running on gas.

The new RTX5 2-stroke test engine is part of Wärtsilä’s 2-stroke dual-fuel gas engine technology development programme. This is an important part of the company’s strategy to lower emissions, increase efficiency and to develop its low-speed engine portfolio to include dual-fuel gas engines alongside its medium-speed dual-fuel engines.
“The decision to initiate this project was announced in February 2011, just seven months ago. The fact that we have already conducted a successful test shows that our gas engine technology is at the forefront of meeting the future needs of shipping, a future that stipulates more stringent environmental regulation….

The tests with the RTX5 engine will continue during the autumn and winter of this year, and into 2012. More details about the engine technology and its performance will be announced upon completion of the programme.

Bitumen or no bitumen? That is the question in the pipeline

Energy

On Thursday, Enbridge CEO Patrick Daniel told Reuters that the company “would prefer to supply natural gas to the Kitimat liquefied natural gas plant in British Columbia over any other export project in western Canada.”

That immediately raised a question in the northwest is Enbridge thinking of replacing the Northern Gateway bitumen pipeline with a natural gas pipeline? Or is it planning two pipelines?

So far Enbridge has not responded to a request from Northwest Coast Energy news for clarification.

This afternoon, Jeff Lewis writing on Alberta Oil’s website in Another suitor sidles up to Kitimat LNG says:

No word yet on whether Tim Wall, the CEO of Apache Canada Ltd., is keen to take on another partner for the massive development. (The Reuters report has Enbridge building a natural gas line in conjunction with its proposed Northern Gateway line, which is to be twinned with a pipe for importing bitumen-thinning condensate from the coast; there’s no mention of sending natural gas west on the Gateway website).

But the question still remains. The Reuters report actually isn’t that clear on whether it will be a bitumen pipeline twinned with a natural gas pipeline or a natural gas pipeline substituted for the bitumen pipeline.

Here is what Reuters said.

Enbridge plans to build a natural gas pipeline along the route of the proposed Gateway oil line, which would transport natural gas from Horn River and other natural gas fields to the coast by 2016, Daniel said.

There is already speculation and rumour in Kitimat about the Enbridge announcement. Environmental activists have long feared that there would be a twinning of the two projects, while many people sitting on the fence were willing to accept liquified natural gas but not bitumen.

If there is any truth to the rumours circulating in Kitimat, there may be more corporate announcements after the Thanksgiving holiday weekend that will make the situation a little clearer.

Enbridge plans natural gas pipeline along Northern Gateway route

Enbridge CEO Pat Daniel has told Reuters in New York that the company would prefer to supply natural gas through Kitimat to Asia “over any other export project” and that Enbridge plans to build a natural gas pipeline along the route of the
proposed Northern Gateway bitumen pipeline.

Pat Daniel was interviewed by Reuters reporter Edward McAllister. In a story with a New York place line the agency reports:

Pipeline operator Enbridge Inc
would prefer to supply natural gas to the Kitimat liquefied natural gas
plant in British Columbia over any other export project in western
Canada, the company’s chief executive told Reuters on Thursday.

Enbridge is interested in joining one of two proposed Canadian LNG
projects to ship natural gas to Asia, it said this week, as ample North
American supply pushes gas prices far below global levels.

But the location of Kitimat has attracted Enbridge more than Royal Dutch Shell’s potential project in Prince Rupert, also in British Columbia, company head Patrick Daniel said in an interview.

“Kitimat is the preferred project. Pipelining into Kitimat is
relatively straight forward compared to Prince Rupert, which is the
other proposed port,” Daniel said, though talks continue with both
projects…..

Enbridge plans to build a natural gas pipeline along the route of the
proposed Gateway oil line, which would transport natural gas from Horn
River and other natural gas fields to the coast by 2016, Daniel said.

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.