Liquified Natural Gas | Northwest Coast Energy News

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.

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.