Apache sells Kitimat LNG stake to Australia’s Woodside Petroleum

Apache CorporationApache Corporation today announced it has agreed to sell its interest in two LNG projects, Wheatstone LNG and Kitimat LNG, along with accompanying upstream oil and gas reserves, to  Australila’s Woodside Petroleum Limited for a purchase price of $2.75 billion.

The news release says:

Apache will also be reimbursed for its net expenditure in the Wheatstone and Kitimat LNG projects between June 30, 2014, and closing which is estimated to be approximately $1 billion.

Under the terms of the agreement, Apache will sell its equity ownership in its Australian subsidiary, Apache Julimar Pty Ltd, which owns a 13-percent interest in the Wheatstone LNG project and a 65-percent interest in the WA-49-L block which includes the Julimar/Brunello offshore gas fields and the Balnaves oil development. The transaction, which has an effective date of June 30, 2014, will also include Apache’s 50-percent interest in the Kitimat LNG project and related upstream acreage in the Horn River and Liard natural gas basins in British Columbia, Canada.

Woodside PetroleumBased on current estimates, Apache’s net proceeds upon closing are expected to be approximately $3.7 billion. Receipt of proceeds from this transaction will trigger an estimated $650 million cash tax liability, approximately $600 million of which is associated with the income tax due on Apache’s Overall Foreign Loss account balance. Upon incurring this income tax liability, Apache estimates that it will have the flexibility to repatriate cash generated from foreign operations and/or future international strategic transactions with minimal U.S. cash tax impact.

“Today’s announcement marks the successful completion of one of our primary strategic goals of exiting the Wheatstone and Kitimat LNG projects. Apache recognizes the contribution of our employees who have worked so diligently on these projects since their inception, and we sincerely thank them for their tremendous effort. I would also like to thank Woodside’s CEO and Managing Director, Peter Coleman, and his entire staff for their hard work and professionalism in bringing this transaction to a successful conclusion. I am proud of Apache’s legacy in advancing the Wheatstone and Kitimat LNG projects, and I am confident that Woodside’s participation will have a positive impact in seeing these world-class LNG facilities through to first production. We look forward to the redeployment of the proceeds from this sale, which may be used to reduce debt, repurchase shares and to pursue other opportunities that enhance our asset base and drive profitable production growth,” said G. Steven Farris, chairman, chief executive officer and president.

Upon completion of the transaction, Apache will continue to hold upstream acreage offshore Western Australia in the Carnarvon, Exmouth, and Canning basins along with related hydrocarbon reserves and production. Apache will also retain its 49-percent ownership interest in Yara Holdings Nitrates Pty Ltd and 10-percent interest in the related ammonium nitrate plant.

The transaction is expected to close in the first quarter of 2015 and is subject to necessary government and regulatory approvals and customary post-closing adjustments. The sale of the Kitimat LNG project is subject to certain operator consents.

Wet’suwet’en First Nation signing on to Coastal GasLink pipeline project, province says

The elected council of the Wet’suwet’en First Nation  have signed an agreement with British Columbia for the proposed Coastal GasLink (CGL) pipeline project,  a news release from the province says.

The news release says:

Wet'suwet'enThe Wet’suwet’en First Nation will receive approximately $2.8 million from the Province at three different stages in the CGL project: $464,000 upon signing the agreement, $1.16 million when pipeline construction begins, and $1.16 million when the pipeline is in service.

The Wet’suwet’en First Nation will also receive a yet-to-be-determined share of $10 million a year in ongoing benefits per pipeline. The ongoing benefits will be available to First Nations along the natural gas pipeline routes. The B.C. government anticipates signing similar agreements with other First Nations in the near future.

Provincial benefit-sharing offers First Nations resources to partner in economic development, complements industry impact benefit agreements that provide jobs and business opportunities, and is a way for government and First Nations to work together to help grow the LNG industry.

John Rustad, Minister of Aboriginal Relations and Reconciliation  says in the release,  “Too many First Nation communities have been left out of economic growth in B.C. for far too long. It’s exciting to be able to partner with First Nations like the Wet’suwet’en so they can share in the benefits of a new LNG export industry – stronger economies, good-paying jobs and collectively working to establish environmental legacies made possible by LNG development.”

The release quotes Chief Karen Ogen, Wet’suwet’en First Nation, as saying, “Pipeline benefits agreements are just one vehicle driving our participation in LNG development. While these agreements ensure First Nation communities share in the economic benefits of LNG, we are working collaboratively with the Province and other First Nations to ensure environmental priorities are addressed as well.”

The release also quotes Rich Coleman, Minister of Natural Gas Development  as saying, “Our government continues to build strong partnerships with First Nations as LNG development gains momentum. Pipeline benefits agreements like this one pave the way for job creation and economic growth as we work together to further the potential of our natural gas sector.”

The news release says the Wet’suwet’en First Nation is among the 15 First Nations located along the Chevron/Apache Pacific Trail Pipeline route that have already signed agreements that will provide $32 million in benefits to First Nations once construction has started.

British Columbia issued an environmental assessment certificate for the proposed CGL project this fall. In addition to meeting conditions set out in the environmental assessment certificate, the project will now require various federal, provincial and local government permits to proceed.

When the certificate was approved in October, the Office of the Wet’suwet’en, which represents hereditary leadership issued a release saying:

B.C. ‘s approval of Coastal GasLink Pipeline project does not mean the project is a go.   The Wet’suwet’en still have the right to determine the use of the land and our future.

Not enough information has been made available through the regulatory process to determine environmental impacts nor infringements to Wet’suwet’en rights title and interest.

Current benefits offered by the province and pipeline companies do not take into account the impacts and infringements to our lands, culture and community well-being, for today and into the future.

 

One group, the Unist’ot’en Camp,  representing one house of the Wet’suwet’en continues to camp out in the bush, and the group says they are determined to block any pipeline construction within their traditional territory.

In its news release, BC says,  benefits agreements are separate and different than industry impact benefit agreements. Pipeline benefits agreements are made between the Province and First Nations, exclusive of proponents. Impact benefit agreements are made between proponents and First Nations, exclusive of the Province.

 

BC orders Prince Rupert air shed study with wider scope than the Kitimat report

The province of British Columbia has posted a request for bids for an extensive air shed study for Prince Rupert, a study that has much wider scope that the controversial Kitimat air shed study. The maximum cost for the study is set at $500,000.

The BC Bid site is asking for 

a study of potential impacts to the environment and human health of air emissions from a range of existing and proposed industrial facilities in the Prince Rupert airshed, further referred to as Prince Rupert Airshed Study (PRAS) in North West British Columbia.

The “effects assessment” should include the “prediction of effects of existing and proposed air emissions of nitrogen dioxide, sulphur dioxide and fine particulate matter (at PM2.5, called dangerous by Wikipedia ) from “an existing BC Hydro gas fired turbine, a proposed oil refinery, and seven proposed LNG export terminals (Pacific Northwest LNG, Prince Rupert LNG, Aurora LNG, Woodside LNG, West Coast Canada LNG, Orca LNG, and Watson Island LNG).”

In addition to “stationary sources” of nitrogen dioxide, sulphur dioxide and particulate matter, “the impact assessment will also include rail and marine transportation sources of these contaminants in the study area.”

Area of the proposed Prince Rupert air shed study. (Environment BC)
Area of the proposed Prince Rupert air shed study. (Environment BC)

The request for proposal goes on to say:

The identified sources will be used for air dispersion modelling to determine how the contaminants in various aggregations (scenarios) will interact with the environment, including surface water, soils, vegetation and humans. Interactions of interest will include:

– water impact mechanisms related to acidification and eutrophication;
– soil impact mechanisms related to acidification and eutrophication; and
– vegetation and human health impact mechanisms related to direct exposure.

Water and soil impact predictions will be based on modelled estimates of critical loads for both media, given existing and predicted conditions in the airshed. Vegetation and human health impact predictions will be based on known thresholds of effects, given modelled existing and predicted conditions (contaminant concentrations) in the airshed.

Although the documents say that the Prince Rupert study will be based on the same parameters at the Kitimat air shed study, the Kitimat study only looked at sulphur dioxide and nitrogen dioxide, and did not include particulate matter.

Environmental groups also criticized the Kitimat air shed study for not including green house gases. The proposed Prince Rupert study also does not include green house gases.

A draft report is due by March 15, for review by the province and affected First Nations and subject to peer review. The District of Kitimat was not asked for comment on the study  on that air shed study, even though scholars as far away as Finland were asked to review it. It appears that Prince Rupert itself is also excluded from a chance to review the study. The final report is due on May 15.

The province has issued a permit to Rio Tinto Alcan to increase sulphur dioxide emissions from the Kitimat Modernization Project. The Environmental Appeal Board  will hold hearings in January 2015.  Elisabeth Stannus and Emily Toews, from Kitimat,  have appealed against  decision to allow RTA to increase sulphur dioxide emissions.

 

Aussie energy company eyeing Apache stake in Kitimat: media reports

The Australian Business Review is reporting that Woodside Petroleum, a cash rich Australian energy company, has its eye on Apache’s 50 per cent stake in the Kitimat LNG project. As part of any deal, Woodside would probably also have to buy Apache’s stake in the Australian Wheatstone LNG project, which is also up for sale.

The months-long process by Apache to find a new home for its West Australian domestic gas business and its stake in the under-construction Wheatstone LNG project — as well as its stake in the Kitimat LNG project in Canada — has drawn plenty of interest from parties in that neck of the woods.

The cashed-up, project-hungry Woodside Petroleum has been interested from the outset in the Kitimat stake, but is also said to be prepared to make an offer on Wheatstone if Apache is determined to sell the assets together


WoodsideEarlier,  another Australian newspaper, The Age reported that Woodside’s petroleum and LNG operations had “revenue of $US5.3 billion for the first nine months of 2014. Compared with the corresponding period in 2013, revenue was 28.7 per cent higher for the 2014 period.”Part of the money came from selling natural gas assets in the United States.

According to The Age:

Woodside’s LNG production rose to a record 5.1 million tonnes for the first nine months of Woodside’s fiscal 2014. The record production represents a rise of 17.6 per cent on the same period for 2013. Behind the result was the operational performance of the Pluto LNG facility (Woodside’s interest is 90 per cent). Pluto lifted LNG production by 24.3 per cent on the corresponding period in 2013, to 3.1 million tonnes. Pluto also produced 2.2 million barrels of condensate for the first nine months of 2014. Oil production rose by a mammoth 33.3 per cent on the same period in 2013, to 8.8 million barrels.

On November 6, according to the Sydney Morning Herald, Woodside’s CEO Peter Coleman warned that the Asian customers for LNG who are holding out for cheaper prices could face a  “supply crunch” and “By holding out for a cheaper price, customers are potentially exacerbating project FID [final investment decision] delays and may unwittingly help bring on a supply crunch.”

He called on suppliers and customers to work together to  ensure supply projects went ahead.

The Woodside website describes the company as  “Australia’s largest independent dedicated oil and gas company and one of the world’s leading producers of liquefied natural gas.​​​​​​”

It goes on to say

As we aspire to become a global leader in upstream oil and gas, we are guided by the Woodside Compass. The Compass links Woodside’s core values – respect, integrity, working sustainably, working together, discipline and excellence – with our vision, mission and strategic direction.

Woodside has an extensive portfolio of facilities which we operate on behalf of some of the world’s major oil and gas companies.
We have been operating the landmark Australian project, the North West Shelf, since 1984 and it remains one of the world’s premier liquefied natural gas (LNG) facilities.

With the successful start-up of the Pluto LNG Plant in 2012, Woodside now operates six of the seven LNG processing trains in Australia.

Glencore: The great white shark stalking Rio Tinto

The world’s business media are paying rapt attention to Glencore’s  now stalled attempt to take over Rio Tinto.
glencore_logo_11652

Late Tuesday, the company issued a news release which says

Glencore announces that in July 2014 it made an informal enquiry by telephone call to Rio Tinto, seeking to gauge whether there might be any interest at Rio Tinto in investigating some form of merger between the two companies. Rio Tinto responded that it was not interested in pursuing these discussions.

Glencore confirms that it is no longer actively considering any possible merger transaction with, or offer for the shares of, Rio Tinto.

As a consequence of this announcement, the Panel Executive has determined that Glencore is for a period of 6 months from the date of this announcement subject to Rule 2.8 of the City Code on Takeovers and Mergers in relation to Rio Tinto. Glencore however reserves its rights to make an offer in the future with the consent of the Takeover Panel, either with the recommendation of the Board of Rio Tinto, in the event of a third party offer for Rio Tinto, or in the event of a material change in circumstances.

Rio Tinto released its own statement saying:

The board of Rio Tinto notes the recent press speculation regarding a possible combination of Rio Tinto and Glencore.
The Rio Tinto board confirms that no discussions are taking place with Glencore.
In July 2014, Glencore contacted Rio Tinto regarding a potential merger of Rio Tinto and Glencore.
The Rio Tinto board, after consultation with its financial and legal advisers, concluded unanimously that a combination was not in the best interests of Rio Tinto’s shareholders.
The board’s rejection was communicated to Glencore in early August and there has been no further contact between the companies on this matter.

According to Bloomberg,  Glencore’s secretive CEO  Ivan Glasenberg made a verbal stock offer to Rio Chairman Jan Du Plessis in July. The Rio Tinto board rejected the offer in August, which means under that UK law, Glencore must wait six months before making another bid.

Glasenberg’s informal July bid carried no significant premium, said the person, who asked not to be identified as the information is private.

Bloomberg’s television arm reports that the Glasenberg’s offer was in stock, an attempt, apparently,  to get Rio Tinto “on the cheap.” Earlier Forbes reported that there were rumours of an offer  from Glencore to Rio Tinto of  a “share-swap merger”

Bloomberg goes on to report that.

After being rebuffed by the board, Glencore has reached out to Rio’s biggest investor, Aluminum Corp. of China, to gauge its interest in a potential deal in the next year, according to people familiar with the matter.

After the initial report on the takeover Monday, business writers used epic analogies.

Forbes says of Glencore “Patient Stalking Of A Target Is A Glencore Hallmark” while the Globe and Mail reports Glencore  “The great white shark of the global commodities industry” is looking for a blockbuster deal.

Meanwhile, behind its premium paywall Lex, the Financial Times is comparing the Glencore bid for Rio Tinto to the Game of Thrones.

The analysts are saying there are two main factors, Rio Tinto’s balance sheet has been weakened by a downturn in the iron ore market while at the same time Glencore aims to overtake Rio Tinto rival BHP Billiton. If it acquires RT, then Glencore will become the world’s largest mining and resource company.

The business media all say Glencore is already the world’s biggest trader in commodities.

The Guardian has called Glencore, the Biggest Company You Never Heard of.

China is  a major force behind this corporate Game of Thrones. China  wants more access to world resources for its increasingly hungry industry and population,while at the same time it has apparently all the iron ore it needs and iron ore is Rio Tinto’s biggest asset.  The key player is a giant Chinese aluminum company now under investigation as part of the country’s corruption crack down.

Glencore is already huge, listed as Number 10 on the Fortune Global 500 list . Rio Tinto is far down at number 201. (Walmart is number one. Companies involved with Kitimat are Shell in second place, Sinopec in third and the China National Petroleum Corporation in fourth. Chevron is in 12th spot.)

Glencore is a major player in the aluminum business with assets around the world, some in partnership with the Russian giant aluminum group Rusal . According to Wikipedia, Glencore owns 8.8 per cent of  a joint venture with Rusal, and the Sual Group (Siberian-Urals Aluminium Company) . That joint venture, Wikipedia says, has created  the “World’s largest aluminium and alumina producer with 110,000 employees in 17 countries.”

Glencore along with Rusal has an undisclosed interest in Rusal’s Windalco alumina operation in Jamaica. Glencore also has an undisclosed interest in the Alumina Partners of Jamaica. It owns 44 per cent of Century Aluminum in Monterey California. Glencore has also undisclosed interests in idle aluminum smelters in Washington State and Montana.  It has an undisclosed interest in Kubikenborg Aluminium AB in Sweden, Aughinish Alumina in Ireland and Eurallumina in Sardinia.

Glencore Brochure Canadian Operations  (pdf)

In the northwest, Glencore, through its agricultural subsidiary Vittera, is a partner, along with Cargill Ltd. and Richardson International in the Prince Rupert Grain Terminal. In Vancouver, Glencore owns  Vittera’s Cascadia grain terminal in Vancouver.

 located on the south shore of Burrard Inlet. Vittera Inc. owns and operates Canada’s largest grain handling network. The terminal handles wheat, durum, feed barley, malting barley, canola seed and specialty products, with storage capacity of 282,830 tonnes of product, handling loading from its 244 metre berth with a depth of 14.6 metres. –

Glencore is also developing a metallurgical coal mine near Chetwynd.

A Glencore stock photo of  lag tapping at the Sudbury Smelter. (Glencore)
A Glencore stock photo of slag tapping at the Sudbury Smelter. (Glencore)

 

Glencore, through the earlier 2013 take over the mining company Xstrata owns the famous Kidd  copper and zinc mine near Timmins, Ontario. The operation has 1300 employees. (Xstrata earlier took over the well-known Canadian mining company Falconbridge). It also operates the Horne copper Smelter in Rouyn-Noranda, Québec, which employees 700 and the CCR copper Refinery in Montreal, Québec which employees 650.

In Sudbury, Glencore is reviving the Errington-Vermillion Project, two deposits were that were previously mined in the 1920s and 1950s. It says the project has potential for approximately nine million tonnes, polymetallic- zinc, lead,copper, silver, gold or a rate of  2,900 tonnes per day.

The other factor for Kitimat with Glencore is that, unlike Rio Tinto, which is mostly a mining and smelting company, Glencore has interests in natural gas, oil and shipping and it is reported that the company wants to expand its hydrocarbon business from extraction to shipping.

According to Forbes, many Rio Tinto shareholders are not happy about the costs of the takeover of Alcan

Rio_Tinto_LogoThe chairman of Rio Tinto, Jan du Plessis said the board was happy with the leadership of managing director, Sam Walsh, and finance director, Chris Lynch.
Interestingly, that might not be a view shared by all Rio Tinto shareholders who are still smarting from the $40 billion written off after the ill-timed acquisition of the Alcan aluminium business, followed by a $3 billion write-off after an equally poorly executed coal asset deal in Africa.

(It should be noted that Walsh was not the CEO at the time of both acquisitions, but was brought in to put Rio Tinto back on track after those huge losses)

The Rio Tinto news release says it’s business as usual:

Rio Tinto remains focused on the successful execution of its strategy, which the board of Rio Tinto is confident will continue to deliver significant and sustainable value for shareholders….

The board believes that the continued successful execution of Rio Tinto’s strategy will allow Rio Tinto to increase free cash flow significantly in the near term and materially increase returns to shareholders. Rio Tinto’s shareholders stand to benefit from the very considerable value that this will generate.

The Guardian says, echoing Forbes’s talk of a patient stalking.

RBC Capital Markets analyst Timothy Huff said: “A potential merger with Rio would enable Glencore to get hold of the lowest-cost iron ore business in Australia. This is likely just a shot across the bow from Glencore and we expect Glencore to play the long game with any highly desired acquisition target. While asset divestments may have to play a larger part in a Glencore/Rio tie-up, we think the broader strategy for an enlarged group makes sense.”

The Globe and Mail Report on Business says

It is an open secret that Mr. Glasenberg, a multibillionaire South African, has every intention of using mergers and takeovers to greatly extend Glencore’s reach along the commodities value chain. Glencore’s strategy is to control the mines, the warehouses, the ports, the ships and the trading networks that produce and distribute commodities.
The question is whether Rio’s management and shareholders would endorse a deal that could come with no takeover premium. Some analysts think not.

One problem with Glencore’s approach to Chinalco is that the company is part of the wider probe by the Chinese government of corruption. As Reuters reported 

Aluminum Corp of China general manager Sun Zhaoxue is suspected of “serious violations” of the law, a euphemism for corruption, according to a notice published by China’s Central Commission for Discipline Inspection.
Sun is also the vice chairman of Chinalco’s listed subsidiary, Aluminum Corp Of China Ltd. He is the former president of China National Gold Group Corp, the country’s biggest gold producer.

Sun resigned the next day . Other company executives had resigned earlier.

Some business analysts say even if Rio Tinto shareholders are not happy with current management they may not want their holdings affected by a possibly corrupt Chinese company.

On the other hand, as the Telegraph points out, it is really the Chinese government that will make the decision, not the company itself.

China’s government holds the key to a deal despite Rio Tinto’s public rejection of Glencore’s interest. State-owned Aluminum Corporation of China is the largest shareholder with around 10 per cent and Glencore reportedly started talking to the Chinese in the summer to sound out their interest in an exit. Although China is the world’s largest consumer of iron ore and owning such a significant stake in one of the world’s biggest mining groups is strategic now could be a good time to exit. The world is flooded with iron ore and securing supplies for steel mills is no longer an issue for the Chinese government. Now is a good time to cash in.

The man behind the so-far  failed deal, who is likely “patiently stalking” Rio Tinto is the highly secretive and private Ivan Glasenberg.

The Telegraph described his role in the Rio Tinto takeover as a “dark art.”

Pounce, leak and wait.
It is a classic strategy in the shadowy world of mergers and acquisitions and Ivan Glasenberg, the chief executive of Glencore, is a master of this dark art.
Although a potential $160 billion mega takeover of the world’s largest shipper of seaborne iron ore, Rio Tinto, was flatly rejected in August, don’t bet on Glasenberg walking away for good

Glasenberg was born in South Africa in 1957, and apparently now holds four passports, South Africa, Australia, Israel and as of 2011, Switzerland.

When Glencore  went public on the London Exchange in 2011, which the Guardian called “the biggest stock exchange float in British history,” the British media received a letter from a London law firm warning the normally aggressive media not to probe into the private lives of the company executives.

Glencore executives, the letter said, “are extremely private individuals”, who expected scrutiny of their business activities, but not their personal lives. A warning followed about the “security risk” that could be posed by any reports about their homes or private lives.

It appears that for the British media the royal family and missing school girls are fair game but not Glencore’s executives.

Should Glencore ever takeover Rio Tinto, the Wall Street Journal says Glasenberg told the paper Glasenberg: We Don’t Do Work-Life Balance  may be a indication of the future, especially for management.

Although he was referring mainly to the company’s main business, commodity trading, the interview is enlightening.

Asked in an interview with The Wall Street Journal if the company has a work-life balance, the 57-year-old billionaire, a former coal trader, says: “No. We work. You don’t come here to take life easy. And we all got rich from it, so, you know, there’s a benefit from it.”

This competitiveness, he says, is smart business. “If I’m not pulling my weight and setting an example” and “traveling 80% of the time”, his charges would complain to the board and try to get him fired….

Mr. Glasenberg says the phenomenon is still at play. “I see it happening. Some guy suddenly decides: ‘I want to take it easier, I want to spend more time with the family’… an attack will come.”

Mr. Glasenberg, who had been CEO of Glencore since 2002, says he is insistent on instilling this culture at Xstrata, a mining company. Glencore had amassed a portfolio of mines over the past decade. “I thought if we could put our hard-working culture as traders into the asset management it will be a great combination and we did do that,” he says.

But according to the Huffington Post, an employee who wants to be a traders is welcome to try.

One area where Glasenberg does get soft however is on worker mobility, noting that blue collar miners can work their way up to earning the eight-figure salaries enjoyed by his squadron of commodities traders. Just try him.

“You want to be a trader, come be a trader,” he told Wall Street Journal. “You want to travel six days a week, you want to travel the world, the door’s open. I earn more than you. Come be a trader. Please, the door’s open.”

If the Glencore news release is correct, that means in six months, on April 7, 2015,  the next move in the future of Rio Tinto will come, unless, as the Glencore news release states “if there is a material change in circumstances”

One thing is clear, Kitimat can now add Rio Tinto and Rio Tinto Alcan to the mix of uncertainty along with Shell, Chevron, Enbridge, Apache and the rest of the corporate movers. In other words, we are all extras in the corporate Game of Thrones.

Chevron sells 30% of Canadian Duvernay shale gas assets to Kuwait

Chevron LogoChevron Corporation says its wholly-owned subsidiary, Chevron Canada Limited, has reached agreement to sell a 30 per cent interest in its Duvernay shale gas  play to Kuwait Foreign Petroleum Exploration Company’s wholly-owned subsidiary, KUFPEC Canada Inc., for $1.5 billion.

The total purchase price includes cash paid at closing as well as a carry of a portion of Chevron Canada’s share of the joint venture’s future capital costs. The Duvernay is located in west-central Alberta, and is believed to be among the most promising shale opportunities in North America.

The agreement creates a partnership for appraisal and development of liquids-rich shale resources in approximately 330,000 net acres in the Kaybob area of the Duvernay.

“This sale demonstrates our focus on strategically managing our portfolio to maximize the value of our global upstream businesses and is consistent with our partnership strategy,” said Jay Johnson, senior vice president, Upstream, Chevron Corporation. “The transaction provides us an expanded relationship with a valued partner. It also recognizes the outstanding asset base we have assembled.”

Following the closing of the transaction, Chevron Canada will hold a 70 percent interest in the joint venture Duvernay acreage and will remain the operator. The transaction is expected to close in November 2014.

“We remain encouraged by the early results of our exploration program and view the Kaybob Duvernay as an exciting growth opportunity for the company,” said Jeff Shellebarger, president of Chevron North America Exploration and Production Company.

Chevron Canada has drilled 16 wells since beginning its exploration program, with initial well production rates of up to 7.5 million cubic feet of natural gas and 1,300 barrels of condensate per day. A pad drilling program recently commenced which is intended to further evaluate and optimize reservoir performance as well as reduce execution costs and cycle time.

Chevron is developing the liquified natural gas facility at Bish Cove, south of Kitimat.  Chevron’s partner in the venture, Apache, is looking to sell its stake in Kitimat LNG after a hedge fund with significant Apache stock holdings decided to change the company’s focus to U.S. operations.

 

Controlling land and pipelines key to Haisla LNG future NEB filing says

The Haisla Nation’s plan for entering the LNG business is based on the idea that “it is anticipated that the Haisla Projects will be developed using a business model based on controlling two components of the value chain: land and pipeline capacity” according to its application to the National Energy Board for a natural gas export licence.

Cedar LNG Development Ltd., owned by the Haisla Nation, filed three requests for export licences with the NEB on August 28, under the names Cedar 1 LNG, Cedar 2 LNG and Cedar 3 LNG.  Another name used in the application is the “Haisla Projects.”

The 25-year export licence request is standard in the LNG business; it allows export of natural gas in excess of projected North American requirements. Thus like the NEB hearings for the Kitimat LNG and LNG Canada projects it is not what is called a “facility” licence which is what Enbridge Northern Gateway requested.

The project anticipates six “jetties” that would load LNG into either barges or ships at three points along Douglas Channel, one where the present and financially troubled BC LNG/Douglas Channel Partners project would be.

A second would be beside the BC LNG project, which may refer to the Triton project proposed by  Pacific Northern Gas parent company Altagas.

Both are on land now owned by the Haisla Nation in “fee simple” land ownership under Canadian law.

Map of Haisla LNG sites
Map from the Haisla application to the NEB showing that the Haisla Projects Region will allow for a total of six LNG jetty sites. One of these, on DL99, is currently ear-marked to be used for a project involving a consortium (BCLNG) One will be situated on the DL309 Haisla fee simple land and the other four jetties are to be  situated on the Haisla leased lands that surround the Chevron-led LNG development at Bish Cove. The map also shows that the Haisla own land at Minette Bay.

The other four would be on land surrounding the current Chevron-led Kitimat LNG project along Douglas Channel and in the mountains overlooking Bish Cove which the Haisla have leased.

Ellis Ross
Haisla Nation Chief Counsellor Ellis Ross at Bish Cove, June 19, 2013. (Robin Rowland/Northwest Coast Energy News)

The move last week and the revelation of the Haisla’s plans for the land are a cumulation of Haisla Nation Chief Counsellor Ellis Ross’s idea of restoring more of the First Nation’s traditional territory by buying or leasing the land using standard Canadian land law and at the same time getting around some of the more restrictive provisions of the Indian Act that apply to reserve land.

Just how the Haisla will go into the pipeline business is not as clear as the First Nation’s acquisition of the land. The application says:

The pipeline capacity required to transport sourced LNG to the Haisla Projects will include a mix of new and existing pipeline and infrastructure. The Haisla are in the advanced stages of negotiating and drafting definitive agreements with the major gas producers and pipeline transmission companies located in the vicinity with respect to securing pipeline capacity. It is expected that the Haisla Projects will rely on the Haisla’s business partners or customers to source gas from their own reserves and the market.

With the Haisla basing their business strategy on land and pipelines, the First Nation’s strategy is looking for  flexibility in what is a volatile and uncertain market for LNG.

The application says the Haisla “are currently in advanced stage discussions and negotiations with a number of investors, gas producers, LNG purchasers, pipeline transmission companies, technology providers and shippers. As such, the particular business models have yet to be finalized. However, it is anticipated that between the various Haisla Projects, multiple export arrangements may be utilized.”

As part of the idea of flexibility, the actual LNG infrastructure will be constructed and operated with potential partners. That is why there are three separate applications so that each “application will represent a separate project with independent commercial dealings with investors, gas producers, LNG purchasers, pipeline transmission companies, technology providers and shippers.”

The Haisla say that they are “working with a number of entities to develop business structures and partnerships to provide transaction flexibility, adequate financing, modern technology, local knowledge, and marketing expertise specific to Asian targets. The separate projects will accommodate expected production and demand and will also allow for a number of midlevel organizations to be involved with the various projects as well as traditional major gas producers and LNG purchasers.”

The Haisla are working with the Norwegian Golar LNG which had been involved in the stalled BC LNG project, using a Golar LNG’s vessels and technology, using a new design that is now being built in Singapore by Keppel Shipyard.

Golar LNG uses PRICO LNG  process technology developed by Black & Veatch,  (Wikipedia entry) “which is reliable, flexible and offers simplified operation and reduced equipment count.”

The filing says the project will “be developed using either barge-based or converted Moss-style FLNG vessels. The terminals will consist of vessel-based liquefaction and processing facilities, vessel-based storage tanks, and facilities to support ship berthing and cargo loading”

The jetties to be used for the Haisla Projects may be either individual FLNG vessels or “double stacked”, meaning that the FLNG vessels are moored side-by-side at a single jetty. The Haisla have conducted various jetty design work and site /evaluation studies with Moffat and Nichol.

The Haisla Projects anticipate that the construction will be in 2017 to 2020, “subject to receiving all necessary permits and approvals” and is expected to continue for a term of up to twenty five years. There is one warning, “The timelines of the Haisla Projects will also depend on the contracts and relationships between the Applicant and its partners.”

The filing goes on to say:

Haisla Nation Council and its Economic Development Committee are committed to furthering economic development for the Haisla. The Haisla’s business philosophy is to advance commercially successful initiatives and to promote environmentally responsible and sustainable development, while minimizing impacts on land and water resources, partnering with First Nations and non-First Nations persons, working with joint venture business partners, and promoting and facilitating long-term development opportunities.

The Haisla Applications will allow the Haisla to be directly involved as participants in Canada’s LNG industry, rather than having only royalty or indirect interests. The Kitimat LNG and LNG Canada projects, and the associated Pacific Trails Pipeline and Coastal Gas Link Pipeline, have increased economic opportunities in the region and the Haisla are very supportive of these projects locating within the traditional territory of the Haisla. The support of the Haisla for these two projects reflects a critical evolution of the Haisla’s economic and social objectives.

You can see the filing on the NEB projects page at http://www.neb-one.gc.ca/clf-nsi/rthnb/pplctnsbfrthnb/lngxprtlcncpplctns/lngxprtlcncpplctns-eng.html

Map from the Haisla Nation application to the NEB showing the proposed LNG developments in relation  to Douglas Channel.
Map from the Haisla Nation application to the NEB showing the proposed LNG developments in relation to Douglas Channel.
Bitumen map
Map from the Enbridge filing with the Joint Review Panel showing the same area with the proposed Northern Gateway bitumen terminal.

 

 

LNG Canada chooses international consortium for front-end engineering

Sammy Robinson
Haisla Chief Sammy Robinson opens the LNG Canada FEED signing ceremony watched by Hiroyuki Shimizu from CSFW LNG Constructors, left, and Wim Ravesloot, Project Director – LNG Canada, right, May 20 2014. (Robin Rowland/Northwest Coast Energy News)

LNG Canada has chosen CFSW LNG Constructors, a consortium of four engineering companies Constructors as its main contractor for Front End Engineering and Design (FEED) as well as project execution services for the proposed liquified natural gas export facility.

The contractors will begin FEED activities for the LNG Canada project on June 1, 2014.

Final go ahead is still subject to a Final Investment Decision which will come, yay or nay, sometime in the next couple of years.

One of the partners in CFSW familiar to Kitimat residents is WorleyParsons.(company website) Others are Chiyoda, a Japanese company specializing largely in LNG construction (Chiyoda website  in Japanese), Foster Wheeler, an international company with expertise in LNG, off shore oil and similar projects and SAIPEM an Italian based engineering company again with energy industry expertise.

WorleyParsons is also a contractor with the Apache/Chevron Kitimat LNG project.

The announcement was made at the LNG Canada facility at the old Methanex office building in Kitimat. Company representatives, members of council and representatives of the Haisla Nation, including Chief Sammy Robinson were at the ceremony.

LNG Canada’s Susannah Pierce said, subject to the final investment decision, Shell and its partners “We want to make this the first LNG project out of British Columbia, serving the energy needs of Asia.” (repeating a similar statement she made in November 2013 at the environmental assessment open house .)

Wim Ravesloot
Wim Ravesloot, Project Director – LNG Canada at the FEED signing ceremony in Kitimat, May 20 2014. (Robin Rowland/Northwest Coast Energy News)

Wim Ravesloot, LNG Canada Project Director said one of the reasons for choosing the consortium was “experience in developing modular construction.”

Rio Tinto Alcan’s Kitimat Modernization project is also highly dependent on modular construction, with many components of the new aluminum smelter are produced in China, brought to Kitimat and then used to create the new potlines and related facilities. Publisher David Black also recently told Kitimat audiences that the reason for the possible location of his refinery near Kitimat, rather than Alberta, is due to the need for large scale modular construction.

“So we are here today to make a statement that we are here to deliver our project in a safe way without any incidents and with out having any impact on the environment.” Raveslook said. “We also want to make a statement that we want to develop this project responsibly with close cooperation with the local people that live here in this town, in the village, here in Haisla lands where we are a guest and hopefully in the future as a respected neighbor.”

Pierce introduced two documents that outlined what she said is LNG Canada’s commitments to the community.

The first said:

LNG Canada is committed to an approach that the First Nations and local communities in the northwest realize economic benefits from this project. These benefits may come in the form of direct employment opportunities for qualified workers and potential contract opportunities for competitive businesses. Most of the employment and contract opportunities during the construction phase will be through CFSW….as a result CFSW and LNG Canada is committed to work together so that local residents can become qualified to work for LNG including investing in skills training, developing long ter partnerships with local education and training facilities in the region to develop and maintain a skilled workforce to support LNG development….a key component of this contract with the community is for you to develop the skills and training for sustainable employment at this project when it proceeds.

The second concerned Health, safety and the environment.

Health, safety and environment is integral in everything at LNG Canada. Our HSE objectives are Goal Zero, meaning no harm to people, no uncontrolled releases to the environment. We comply with life saving rules we respect and care for people and the environment. We are engaged, committed and lead by example. We set clear expectations for staff and contractors. We communicate openly and honestly, encouraging everyone to speak up. We are learning organization with a focus on continuous improvement. We hold each other accountable, share information and celebrate success.

Related

FosterWheeler News release

LNG Canada passes first step in BC environmental review, to hold LNG demonstration at Mt. Elizabeth Theatre

LNG Canada logoLNG Canada, the project led by Shell Canada Energy, has passed the first step in the environmental review process for the liquified natural gas plant and terminal.

LNG Canada said Tuesday that the British Columbia Environmental Assessment Office has  approved LNG Canada’s Application Information Requirements (AIR) for the proposed project.

The company says the AIR outlines the studies, methods, and information that will be required in LNG Canada’s Application for an Environmental Assessment Certificate.

The LNG Canada AIR was developed in consideration of comments submitted by the public, First Nations and regulators during a 30-day public comment period held in November/December 2013, including a public meeting at the  Kitimat Rod & Gun, where documents were distributed and employees answered questions from politicians and the public.

LNG Canada says it will now continue to gather information and complete studies in support of developing our Environmental Assessment Application.

The company  intends submit to the Environmental Assessment Application to the the B.C. EAO later this year.

LNG Canada will hold its next public meeting, an “LNG Demonstration and Presentation” on March 6, 2014 at the Mount Elizabeth Theatre starting at 6 p.m. The company says the event is to “to share information and answer questions about liquefied natural gas (LNG).” Starting at 7 pm there will be a a live demonstration using LNG to explain the science behind liquefaction and the properties of LNG.

For more information about the project’s EA process, www.eao.gov.bc.ca and look for our project under the “Proposed EAs” sections.

The other partners in the LNG Canada project are Diamond LNG Canada, an (“affiliate” of Mitsubishi), Korea Gas Corporation and Phoenix Energy (an “affiliate” of PetroChina).

Methane leaks from natural gas industry 50 per cent higher than EPA estimates study says

EPA Gas Leakage
This shows EPA Greenhouse Gas Inventory leakage estimates. Below: This shows results from recent experimental studies. Studies either focus on specific industry segments, or use broad atmospheric data to estimate emissions from multiple segments or the entire industry. Studies have generally found either higher emissions than expected from EPA inventory methods, or found mixed results (some sources higher and others lower).
( Stanford University School of Earth Sciences)

 

 

A new study indicates that atmospheric emissions of methane, a critical greenhouse gas, mostly leaking from the natural gas industry are likely 50 per cent higher than previously estimated by the US Environmental Protection Agency.

A study, “Methane Leakage from North American Natural Gas Systems,” published in the Feb. 14 issue of the international journal Science, synthesizes diverse findings from more than 200 studies ranging in scope from local gas processing plants to total emissions from the United States and Canada.

The scientists say this first thorough comparison of evidence for natural gas system leaks confirms that organizations including the EPA have underestimated U.S. methane emissions generally, as well as those from the natural gas industry specifically.

Natural gas consists predominantly of methane. Even small leaks from the natural gas system are important because methane is a potent greenhouse gas – about 30 times more potent than carbon dioxide.

“People who go out and actually measure methane pretty consistently find more emissions than we expect,” said the lead author of the new analysis, Adam Brandt, an assistant professor of energy resources engineering at Stanford University. “Atmospheric tests covering the entire country indicate emissions around 50 per cent more than EPA estimates,” said Brandt. “And that’s a moderate estimate.”

The standard approach to estimating total methane emissions is to multiply the amount of methane thought to be emitted by a particular kind of source, such as leaks at natural gas processing plants or belching cattle, by the number of that source type in a region or country. The products are then totalled to estimate all emissions. The EPA does not include natural methane sources, like wetlands and geologic seeps.

The national natural gas infrastructure has a combination of intentional leaks, often for safety purposes, and unintentional emissions, like faulty valves and cracks in pipelines. In the United States, the emission rates of particular gas industry components – from wells to burner tips – were established by the EPA in the 1990s.

Since then, many studies have tested gas industry components to determine whether the EPA’s emission rates are accurate, and a majority of these have found the EPA’s rates too low. The new analysis does not try to attribute percentages of the excess emissions to natural gas, oil, coal, agriculture, landfills, etc., because emission rates for most sources are so uncertain.
Several other studies have used airplanes and towers to measure actual methane in the air, to test total estimated emissions. The new analysis, which is authored by researchers from seven universities, several national laboratories and US federal government bodies, and other organizations, found these atmospheric studies covering very large areas consistently indicate total U.S. methane emissions of about 25 to 75 per cent higher than the EPA estimate.

Some of the difference is accounted for by the EPA’s focus on emissions caused by human activity. The EPA excludes natural methane sources like geologic seeps and wetlands, which atmospheric samples unavoidably include. The EPA likewise does not include some emissions caused by human activity, such as abandoned oil and gas wells, because the amounts of associated methane are unknown.

The new analysis finds that some recent studies showing very high methane emissions in regions with considerable natural gas infrastructure are not representative of the entire gas system. “If these studies were representative of even 25 percent of the natural gas industry, then that would account for almost all the excess methane noted in continental-scale studies,” said a co-author of the study, Eric Kort, an atmospheric science professor at the University of Michigan. “Observations have shown this to be unlikely.”

Methane air sampling systems
Top-down methods take air samples from aircraft or tall towers to measure gas concentrations remote from sources. Bottom-up methods take measurements directly at facilities. Top-down methods provide a more complete and unbiased assessment of emissions sources, and can detect emissions over broad areas. However, they lack specificity and face difficulty in assigning emissions to particular sources. Bottom-up methods provide direct, precise measurement of gas emissions rates. However, the high cost of sampling and the need for site access permission leads to small sample sizes and possible sampling bias.
(Stanford University School of Earth Sciences)

Natural gas as a replacement fuel

The scientists say that even though the gas system is almost certainly leakier than previously thought, generating electricity by burning gas rather than coal still reduces the total greenhouse effect over 100 years. Not only does burning coal release an enormous amount of carbon dioxide, mining it releases methane.

Perhaps surprisingly though, the analysis finds that powering trucks and buses with natural gas instead of diesel fuel probably makes the globe warmer, because diesel engines are relatively clean. For natural gas to beat diesel, the gas industry would have to be less leaky than the EPA’s current estimate, which the new analysis also finds quite improbable.

“Fueling trucks and buses with natural gas may help local air quality and reduce oil imports, but it is not likely to reduce greenhouse gas emissions. Even running passenger cars on natural gas instead of gasoline is probably on the borderline in terms of climate,” Brandt said.

The natural gas industry, the analysis finds, must clean up its leaks to really deliver on its promise of less harm. Fortunately for gas companies, a few leaks in the gas system probably account for much of the problem and could be repaired. One earlier study examined about 75,000 components at processing plants. It found some 1,600 unintentional leaks, but just 50 faulty components were behind 60 percent of the leaked gas.

“Reducing easily avoidable methane leaks from the natural gas system is important for domestic energy security,” said Robert Harriss, a methane researcher at the Environmental Defense Fund and a co-author of the analysis. “As Americans, none of us should be content to stand idly by and let this important resource be wasted through fugitive emissions and unnecessary venting.”

Gas companies not cooperating

One possible reason leaks in the gas industry have been underestimated is that emission rates for wells and processing plants were based on operators participating voluntarily. One EPA study asked 30 gas companies to cooperate, but only six allowed the EPA on site.

“It’s impossible to take direct measurements of emissions from sources without site access,” said Garvin Heath, a senior scientist with the National Renewable Energy Laboratory and a co-author of the new analysis. “But self-selection bias may be contributing to why inventories suggest emission levels that are systematically lower than what we sense in the atmosphere.”

The research was funded by the nonprofit organization Novim through a grant from the Cynthia and George Mitchell Foundation. “We asked Novim to examine 20 years of methane studies to explain the wide variation in existing estimates,” said Marilu Hastings, sustainability program director at the Cynthia and George Mitchell Foundation. “Hopefully this will help resolve the ongoing methane debate.”

###
Other co-authors of the Science study are Francis O’Sullivan of the MIT Energy Initiative; Gabrielle Pétron of the National Oceanic and Atmospheric Administration (NOAA) and the University of Colorado; Sarah M. Jordaan of the University of Calgary; Pieter Tans, NOAA; Jennifer Wilcox, Stanford; Avi Gopstein of the U.S. Department of State; Doug Arent of the National Renewable Energy Laboratory and the Joint Institute for Strategic Energy Analysis; Steven Wofsy of Harvard University; Nancy Brown of the Lawrence Berkeley National Laboratory; independent consultant Richard Bradley; and Galen Stucky and Douglas Eardley, both of the University of California-Santa Barbara. The views expressed in the study are those of the authors, and do not necessarily reflect those of the U.S. Department of State or the U.S. government.