Shell | Northwest Coast Energy News

LNG Canada aims to be “first out of the gate” in the rush to develop in Kitimat

LNG Canada meeting — Residents of Kitimat discuss the proposed LNG Canada facility with company officials at the Rod and Gun, Nov. 27, 2013 (Robin Rowland/Northwest Coast Energy News)

LNG Canada says it wants to be “first out of the gate” in the competitive race to send BC’s liquified natural gas to Asian markets.

The company held a well attended open house at the Kitimat Rod and Gun on November 27, with the usual array of posters and experts, to mark the beginning of the environmental assessment process for what is formally called the “LNG Canada Export Terminal Project.:

The LNG Canada Export Project is a partnership of Shell,Canada Energy, Diamond LNG Canada, an (“affiliate” of Mitsubishi), Korea Gas Corporation and Phoenix Energy (an “affiliate” of PetroChina) filed a draft application for an Environmental Assessment Certificate with the BC Environmental Assessment Office and Canadian Environmental Assessment Agency on November 8. The 30-day public comment period on the draft Application Information Requirements started on November 13, 2013 and end on December 13, 2013.

The extensive documentation can be downloaded in PDF format from the BCEAO site. The documents can also be viewed at the Kitimat and Terrace Public Libraries and the LNG Canada office in Kitimat at the old Methanex site.

“What we want to be able to do is actually to provide information in a way that we can provide a lot of conversation with the community, so we can really have a dialogue, to give them a place where they know than go to get answers. We do believe that we can be the best project in British Columbia, the only way we can do that is if we have the support of the community,” LNG Canada’s Susannah Pierce told reporters.

“We would like to be first out of the gate. This is a competitive industry and we’re not just competing in terms of providing Canadian gas to the Asian markets, we’re competing with everyone else for the opportunity to deliver product to market.”

The application says that the all-important Financial Investment Decision will likely be “made mid-decade followed by 4-5 years of construction with commissioning of the first phase to follow.”

The first phase would have a first phase of about 12 million tonnes a year of LNG, with another MTPA (million tonnes per anum) in “one or two subsequent phases.”

Federal, provincial and municipal governments or agencies, First Nations and the general public have the ability to comment on the proposal.

An aerial photo map included in the application shows the footprint of the proposed LNG Canada operation. Although the LNG Canada project is based at the old Methanex plant, the map shows that the LNG plant will take up a much larger area than the original. The old Methanex access road would be widened parallel to the Rio Tinto Alcan smelter and a Cyrogenic Pipeline would cross the Kitimat River estuary to the marine terminal.

LNG Canada footprint map — A map provided by LNG Canada shows the potential footprint of the liquifaction facility and marine terminal next to the Rio Tinto Alcan aluminum smelter. (LNG Canada)

The scope of the project includes one possibly controversial item: “Onsite power generation,” where natural gas would be used to power the cooling equipment to turn the gas into LNG.

The assessment will also look the natural gas receiving and production facility; “a marine terminal able to accomodate two LNG carriers each with capacity up to 265,000 cubic metres (approximately 122,000 DWT) and a materials offloading area; supporting infrastructure and the construction facilities.

The environmental assessment will examine air quality, green house gas management, the acoustic environment (the noise created by the project), soil, vegetation, wildlife, freshwater, esturine fish and habitat, marine resources including fish and fish habitat and marine mammals, water and ground water quality.

The economic and social assessment includes infrastructure, land use, “visual quality,” odour, marine transportation and use, community health and well being, archaeological heritage and human health.

The assessment process will also “assess potential cumulative economic, health, social and heritage effects from the Project…interacting cumulatively with similar effects of past, present and future projects activities. The current table of projects to be considered for cumulative effects include the Rio Tinto Alcan Aluminum Smelter and Modernization Project, the Kitimat LNG and Douglas LNG terminals, the possible Enbridge Northern Gateway porject, the new use for the old Methanex and Cenovus operations, the operations at the Sand Hill, the former Moon Bay and current MK Bay Marinas.

Projects further away include LNG and other projects and associated pipelines at Prince Rupert, including expansion of the current ports and the redevelopment of Watson Island. Cruise ship and BC ferry operations will be only considered where they impact the shipping routes. Any forestry operations will also only be considered where they impact the project.

Updated to fix typos, including spelling of Feldhoff

LNG Canada maps air shed study area

Kitimat Airshed Map — Map released by LNG Canada shows the air shed area that the company will study as part of the environmental assessment. (LNG Canada)

Two of the maps filed by the LNG Canada project with provincial and federal environmental assessment agencies look at the air quality problems from the project, including the controversial prospect of cumulative problems from multiple industrial projects in the Kitimat Valley, one of them the RTA Kitimat Modernization Project which will increase sulphur dioxide emissions while decreasing some other emissions.

One map covers what is being called the airshed, in the case of LNG Canada, air quality will be assessed with the LNG facility at its centre. A second map covers the tanker route, and as well as a 40 km square grid around the plant that will also assess Hartley Bay, Kitkatla and Metalkatia which may be impacted by vessel emissions.

As well as scientific data, the assessment will also take into consideration traditional knowledge and traditional use from “aboriginal and other groups.”

The possible cumulative effect on the air quality in the Kitimat valley and surrounding areas has prompted the BC government to commission its own study of the Kitimat airshed.
On Oct 3, the provincial ministries of the environment and gas development announced a $650,000 scientific study “to help inform regulatory and policy development for future industrial activity in the Kitimat area. The goal is to ensure the potential impacts from industrial air emissions are clearly understood prior to new projects being approved and in operation.”
It says

The Kitimat Airshed Impact Assessment Project will look at the cumulative effects of existing and proposed industrial air emissions in the airshed. These include emissions from: an existing aluminium smelter, three proposed LNG terminals, a proposed oil refinery, a crude-oil export facility, and gas-turbine-powered electrical generation facilities. The study will focus on sulphur dioxide and nitrogen dioxide emissions from these facilities.

The study will assess the impact of emissions through a number of scenarios, including their potential effects on water and soil, as well as on vegetation and human health from direct exposure.

BC defines an airshed as

An airshed is generally described as an area where the movement of air (and, therefore, air pollutants) can be hindered by local geographical features such as mountains, and by weather conditions. The most obvious example in British Columbia is a mountain valley. Since air pollution knows no political boundaries, airshed activities may be focused on a single community or on a number of neighbouring communities faced with similar air quality problems and requiring similar action.

The LNG Canada assessment will look at two potential adverse effects, first a change in ambient air quality in the Kitimat airshed or along the marine access route and second any change in acidic deposition pattern in the Kitimat Valley.

The first study will look specifically at estimated levels of “criteria air contaminets” including sulphur dioxide, Nitrogen oxides, carbon monoxide, atmospheric particulate matter and hydrogen sulphide. The particulate matter study will use the international standard of 2.5 micrometres.

The assessment will also study possible cumulative effects on air quality of multiple projects and those projects over time.

LNG Canada air quality map — LNG Canada map shows the marine and land areas that will be studying for air quality. (LNG Canada)

KOGAS selling stake in Kitimat’s LNG Canada

Reuters is reporting that the Korean Gas Corp is selling part of its stake in the Shell-led LNG Canada project in Kitimat.

Reuters says KOGAS CEO Jang Seok-hyo told the World Energy Congress that the company is considering selling 5 to 10 per cent of its stake in the LNG Canada project. It currently holds 20 per cent.

The sale is apparently an effort to improve the company’s bottom line. The South Korean government recently began a review of state-owned oil and gas investments with are suffering from poor profits.

Kogas, which is the world’s largest corporate buyer of LNG, is also considering selling part of its 15 per cent holding in the $18.5 billion Gladstone LNG (GLNG) project in Australia.

One of the Kitimat LNG projects plans to self-generate power for liquefaction plant

At least one of the two large liquified natural gas projects in Kitimat is, at least at this point, planning to self-generate the power required using a gas-fired, steam-driven electrical generation system.

A job ad posted this weekend by the headhunting firm Fircroft is seeking a Lead Project Engineer, Power Plant for “Our client, a major international owner/operating company, requires expertise for their LNG mega-project in Western Canada.”

The job, which requires 20 years and more experience, would be located in Calgary for eighteen months, then move to Kitimat for the remainder of a four year contract paying from $1650 to $1850 per day.

By Fircroft describing the job as a “mega-project” means that the client is either Shell’s LNG Canada project or the Chevron and Apache KM LNG project, since the much smaller BC LNG project could not be described as a “mega-project.”

As well as the standard qualifications for a senior engineer, the job posting lists:

• Power Plant design, operation and construction experience required.
• Boiler design, construction, operation, and commissioning experience required.
• Heat Recovery Steam Generation (HRSG) design, processes, construction, operation, and commissioning experience required.
• Integrates inherent safety in design and operability in concept selection and development for gas resource opportunities.

Providing the power for the Kitimat and other northwestern LNG projects is becoming controversial. The power is needed to cool the natural gas so it can be loaded onto tankers for shipment to customers.

The BC government recently announced a $650,000 study of the cumulative effect on air quality for the planned industrial expansion in the Kitimat area, including the Rio Tinto Alcan Kitimat modernization project, which would increase the amount of sulphur dioxide emissions, combined with as many as three LNG projects and the associated increase in tanker traffic, as well as the possible and even more controversial Enbridge Northern Gateway project.

At the time of the BC announcement, the Globe and Mail reported:

If natural gas is used either for direct-drive or combined-cycle electricity generation to produce the energy required for the proposed Shell LNG facility at Kitimat, approximately 300 million cubic feet of natural gas would be burned. The proposed Chevron Apache LNG facility could burn approximately 140 million cubic feet of natural gas.

The other alternative for powering the LNG plants is to use hydro-electricity, and BC Hydro at the moment doesn’t have the capacity to supply the LNG projects with power. One possibility is the controversial Site C dam project in the Peace River basin, which is also under review by the BC government.

Although the job is restricted to Canadian citizens or permanent residents, it is clear that the engineer will have to also answer to the project’s overseas partners since one requirement is to conduct: “Overseas VIP workshops, including Value Engineering, Process Simplification, Process Optimization and Design to Capacity.”

Why BC should watch the Australian election: LNG and natural gas are suddenly a top issue

Could the future of northwestern British Columbia’s hoped for natural gas boom depend on the outcome of this weekend’s Australian general election?

While the mainstream media in North America has mostly been following the personal feud between Prime Minister Kevin Rudd and Opposition Leader Tony Abbott or speculating whether or not Wikileaks founder Julian Assange’s party will make a ripple or a splish, a natural gas crisis has rocketed high on to the Australian election agenda.

I’ll be the first to admit that I know very little about Aussie politics, but I couldn’t ignore all the LNG and natural gas Australian election related stories that suddenly started showing up in my alerts.

LNG train “on ice”

This morning came the alert that Chevron has put the development of another train at its giant Gorgon LNG facility “on ice” (as a pun enabled headline writer in the Western Australian put it)

Chevron and its partners in the Gorgon LNG project on Barrow Island are expected to postpone work on detailed design and engineering of a fourth processing line at the mega project until at least next year as they battle to contain the soaring cost of the foundation development.
As reported by WestBusiness at the weekend, Chevron’s latest internal cost review is understood to have placed a final cost on Gorgon’s three-train venture of up to $US59 billion ($65.6 billion), or 13 per cent above the last confirmed budget revision of $US52 billion.
Chevron is refusing to discuss the status of the cost review and is understood to have told its Gorgon team to “value engineer” in the hope of substantially reducing the latest overrun on a project that was originally supposed to cost $US37 billion to complete.

Raw logs all over again

For a resident of northwestern BC, one thought comes to mind from the media reports on the LNG situation in the Australian election, it’s raw logs all over again.

It appears from those media reports that while Australia has huge reserves of shale-based natural gas, the way the country has structured its LNG boom, major industries and consumers are becoming alarmed that domestic natural gas prices for both will soon skyrocket. There are calls for whatever party wins the election to pass legislation that would create “domestic gas reservation” so that Australians won’t see the gas exported while they pay higher prices for what’s left over.

Most of the shale gas reserves are in Western Australia, while the population—and industry– are concentrated far away on the east coast.

That is leading to another controversy, demands that eastern Australia develop its coal gas reserves, which, of course, brings to mind Shell’s decision to forgo development of coal gas deposits in the Sacred Headwaters and the ongoing fight by the Tahltan First Nation to stop Fortune Minerals’ open pit coal mine in the Sacred Headwaters at Klappan.

Then there’s another vexing issue that northwestern BC is facing and soon have to deal with. In the election, some Australian politicians and unions are calling for curbs on the use for temporary (and not so temporary) foreign workers.

Another factor is the growing cost of natural gas extraction and LNG export, which has, in the midst of the election campaign, pitted Chevron against Australian unions, with Chevron executives (as they did in other contexts before the election call) pointing to Canada—that means Kitimat, folks — as the cheaper alternative.

Rising prices

The Australian has reported that a poll, commissioned by the nation’s manufacturers, so it is somewhat suspect, that:

Manufacturers will today claim that most Australians want a policy of domestic gas reservation and that this would sway voter intentions, a move set to renew the acrimonious debate over rising gas prices.
Manufacturing Australia will release a survey it commissioned where 35 per cent of people said it was “quite likely” and 13 per cent “extremely likely” that it would sway their decision at the election if a party made a policy pledge on the issue.Those uncertain stood at 21 per cent.

In one Australian riding, a local candidate wants one per cent of Australia’s gas be reserved just for the State of Queensland.

Bob Katter flew through Gladstone as fast as the wind whistled through Spinnaker Park on Monday, where he told local media he wanted to reserve a domestic gas supply for Australia and scrap the 457 visas that bring foreign workers into the country….

Mr Katter said mineral processing was under enormous pressure in Australia with copper processing wiped out in northern Queensland and to counter that, the Katter Australia Party would reserve 1% of the gas supply for Queensland.
“Because of the escalating skyrocketing cost of coal, gas and electricity in the past eight years, one per cent of the gas will be reserved for the benefit of the people in Queensland if not Australia,” he said.

“That gas will be used to produce electricity at prices our retirees can afford, and young families can afford, and most importantly that our mineral processing plants have prices for processing they can afford.”

Coal gas

Another story in The Australian quotes James Baulderstone of the Australian energy company Santos:

THE NSW gas industry has warned of higher gas prices, job cuts and a significant risk to the state’s energy security if the coal-seam gas sector is not developed.
James Baulderstone, vice-president of eastern Australia at Santos, said without indigenous gas of its own, NSW had no ability to control its energy supply security.
“NSW faces prospective gas shortages as long-term contracts underpinning the state’s gas supply expire over the next two to three years, the very time in which the commencement of LNG exports from Queensland will see annual gas demand in eastern Australia triple,” he said.
“Looming natural gas shortages in NSW could be avoided by the timely and balanced development of the state’s already discovered reserves of natural gas.”

The Australian Liberal Party (which like BC’s is actually conservative) supports coal gas projects. But it also wants to force energy companies to develop gas reserves they have leased.

Chevron and the unions

Also embroiling the election is the growing dispute between Chevron and the Australian unions.
As the Australian Financial Review reported, Chevron is claiming that high costs are slowing the LNG projects and blaming the government of Prime Minister Kevin Rudd.

The federal government has rejected claims from Chevron that Australia’s high-cost economy is threatening the nation’s biggest energy project, Gorgon, even as the Maritime Union of Australia demands a 26 per cent pay rise and more than 100 other benefits for its members, including Qantas Club memberships and iTunes store credits.

As Chevron’s $52 billion Gorgon project became embroiled in the election campaign, trade union officials accused Chevron of seeking to dodge responsibility for poor labour productivity and high costs.

The union’s demands for employees working for 19 offshore oil and gas contractors around Australia include a 26 per cent raise over four years, no foreign labour without consultation, union control of hiring and four weeks holiday for every four weeks work.

(Note there are accusations of biased reporting during this election, especially from the media owned by Rupert Murdoch. I could find no independent confirmation of union demands for airline memberships and iTunes credits)

The Australian Labour minister, Gary Gray, who is from Western Australia, and according to reports, in a tough re-election fight, is blaming Chevron and the other energy companies for “failing to control the costs of their staff and contractors.”

“We do need our companies to get better in managing their productivity issues,” he said.

Prime Minister Kevin Rudd said he had studied China’s latest five-year economic plan and concluded Australia’s industrial relations system wasn’t hurting the industry.

Boom or bust?

The Australian Financial Review quotes Chevron Australia managing director Roy Krzywosinski as saying Australia has a two-year window to get policy settings right and fix industrial relations and productivity or risk losing out on billions of further investment in liquefied natural gas projects.

It goes on to make a reference to Shell and operations in Canada—again that’s Kitimat folks.

after the unprecedented rush of LNG investment in the past four years, Australia has become the most costly place worldwide for new plants, while new competition is emerging in North America and east Africa.

Shell, which has slowed its $20 billion-plus Arrow LNG project in Queensland, said construction costs in Australia are now up to 30 per cent higher than in the US and Canada.

Mr Krzywosinski said LNG projects are “long-term projects that transcend governments” and Chevron would work with all sides of politics to get policy settings right.

This Australian blogger warns:

The investment surge in LNG – often favourably compared with the Apollo moon program in its magnitude – is in some ways a bubble. Firms have rushed in, extrapolated an endless supply/demand imbalance for their product, ignored global competition, over-paid for assets and developed with little thought to what others were doing, grossly inflating input costs in the process.

The blogger goes on to say

This fallout is typical of the “built it and they will come” attitude that seized energy and mining executives in the final stages of the “commodity super cycle” boom. A similar story, with different dynamics, is playing out in coal and next year in iron ore.
The unions are largely not to blame for the cost blowouts even if they are a party to them. They are, after all, unions. What does capital think will happen if it hands them such a card to play?

Sound familiar?
Australia a mirror of the BC election?

Again it appears from this far off shore, that the Australian election is somewhat mirroring the recent BC provincial election and not only because of the issue of LNG. The Labour PM Kevin Rudd returned to power after three years on the back benches, coming back after the party dumped PM Julia Gillard.

Like BC, the Australian Liberal Party is really conservative. The Liberal Leader Tony Abbott, wants to abolish Australia’s carbon tax but Abbott is also threatening to fine companies that don’t lower prices if (or when) the carbon tax is abolished.

The polls show that the Liberal Party is leading, but that Kevin Rudd is more popular than Tony Abbott. Rudd is running an attack campaign against Abbott, warning of the consequences of an (conservative) Liberal victory. Sounds a bit like Christy Clark.

Given the split in the polls, with the leader of one party more popular than the leader of the party that is leading the polls, this video of the editors of The Australian which accompanies this story shows their senior editors are awfully confident, perhaps over confident, about the polls. I know given what happened in BC, Alberta and even Israel, I’d be a lot more skeptical.

We’ll know the outcome of the Australian election by this time next week. As for LNG, given the volatility of the market, who knows?

(Editor’s Note: Tony Abbott and the Australian Liberal Party won a landslide victory in the weekend vote)

(Note some of the Australian media sites appear to be metered and allow only one viewing)

Shell’s LNG Canada holds open house for Kitimat

The Shell LNG Canada project officially opened its Information Centre at the old Methanex site offices in Kitimat on Tuesday, June 25, 2013. About 180 people attended the event, which included a barbeque, kids activities with face painting, a tour of the office/information centre and a chance to community to meet the LNG Canada project team. Shell’s partners in LNG Canada are Mitsubishi, PetroChina and Korea’s Kogas.

Samuel “Sammy” Robinson, Chief Jassee of the Haisla Nation, offered an opening prayer and welcoming remarks on behalf of the Haisla for the project in Haisla traditional territory (Robin Rowland)

LNG Canada project Director Rob Seeley makes opening remarks. “We are confident that the Shell-led LNG Canada Project Team has the combined expertise to safely and successfully design and operate this project. We thank you for welcoming us to your community and look forward to working together to develop a project that we can all benefit from and be proud of.” (Robin Rowland)

LNG Canada’s Craig Jackson explains shipping issues to Kitimat residents touring the LNG Canada open house. (Robin Rowland)

LNG Canada’s Seiichi Tsurumi speaks to Kitimat residents touring the information centre. (Robin Rowland)

Kitimat residents touring the information centre watch a video on LNG tankers. (Robin Rowland)

The LNG Canada information centre and office building during the open house. (Robin Rowland)

Everything you wanted to know about the LNG market (according to one report)

A report issued by Ernst & Young, The Global LNG Report, says that there will be strong demand for liquified natural gas over the next 10 to 20 years. At the same time LNG buyers will increasingly push back from “price-sensitive buyers who are likely to be less willing to pay supply security premiums.

That means that the pricing for LNG in Asia will move away from the link to the price of oil, which, so far, has been driving the potential profit picture of Kitimat’s LNG projects.

Ernst & Young says:

Even with reasonably strong demand growth, this implies growing supply-side competition and upward pressures on development costs and downward pressures on natural gas prices. Nevertheless, the very positive longer-term outlook for natural gas is driving investment decisions, both in terms of buyers’ willingness to sign long-term contracts and sellers’ willingness to commit capital to develop the needed projects.

The report says there have been three waves of LNG development.

The first wave was dominated by Algeria, Malaysia and Indonesia, while the second wave has been dominated by Qatar and Australia. The third wave could come from as many as 25 other countries, many of which currently have little or no capacity; but by 2020, these countries could provide as much as 30 per cent of the world’s LNG capacity.

The accounting and consulting firm says the most important LNG exporters will be those in western Canada and the United States “where the source gas is likely to be priced on a spot basis, unlike gas elsewhere in the world which is generally priced (wholly or partially) on an oil-linked basis.”

The report, and the charts that accompany it, show that Kitimat appears to be well positioned in the new LNG market. That’s because the capital cost of developing LNG projects in Kitimat, when
compared to potential return, is a lot lower than in many competing countries.

The one problem Kitimat may face in the future is competition from U.S. “brownfield” developments that could turn import terminals into export terminals.
Ernst and Young says that country most cited as Kitimat’s competition Australia, is facing problems.

LNG project proposals are growing faster than industry’s capabilities to develop them. Generally at the high-end of the cost curve, with development bottlenecks and spiraling construction costs, Australian projects are typically under the most pressure. Sanctioned projects are generally less significantly impacted, but projects still seeking contracted off-take are at substantial risk.

One advantage for Kitimat may be that buyers, worried about the volatility of the market, may be more inclined to sign long term contracts.

Overall Ernst & Young concludes:

The proposed North American LNG export projects are particularly well-positioned, even though the US Gulf Coast projects will give up some of their Free On Board (FOB) cost advantage with higher shipping costs. As substantial volumes of lower-cost LNG move into Asian markets, projects at the high end of the supply curve – namely, many of the Australian projects – will become increasingly vulnerable.

Going forward over the medium-to-longer-term, Ernst & Young expects to see a gradual but partial migration away from oil-linked pricing to more spot or hub-based pricing. LNG sellers are reluctantly facing realities and are offering concessions in order to remain competitive.

Dale Nijoka, Ernst & Young’s Global Oil & Gas Leader concludes: “LNG prices are unlikely to collapse, simply because the cost to supply is high and incentives to develop new capacity must be maintained.”

Links

Ernst & Young news release

Download the full Ernst & Young report

PetroChina in multi-billion dollar LNG buying spree in Canada and Australia

PetroChina went on a multi-billion dollar natural gas buying spree Thursday, Dec. 13, 2012, picking up shares in operations in both Canada and Australia.

In Canada, Encana, one of the partners in the Kitimat LNG project, signed a joint venture arrangement with Phoenix Duvernay Gas, a wholly owned subsidiary of PetroChina, to explore and develop Encana’s extensive undeveloped Duvernay naturgal gas holdings in west-central Alberta. According to an Encana news release, Phoenix will gain a non-controlling 49.9 per cent interest in Encana’s approximately 445,000 acres in the Duvernay play for total consideration of C$2.18 billion.

Hours earlier, PetroChina agreed to pay $1.63 billion for BHP Billiton’s 10 per cent share for an Australian LNG development, known as Browse, that like the KM LNG project in Kitimat had been delayed by the uncertainty in the LNG market. The other partners in the Browse are Woodside Petroleum, Chevron Corporation, Royal Dutch Shell and BP.

Encana says the PetroChina/Phoenix investment is significant for the Duvernay, which Encana describes as a “liquids rich play” with potential for natural gas, butane and oi development.

THE Encana release quotes Randy Eresman, Encana President & CEO. “A transaction of this magnitude keeps us on track to create a more diversified commodity portfolio and maintain our balance sheet strength. It is a strong endorsement of Encana’s position as a reliable long term partner.”

The release also quotes Zhiming Li, Phoenix’s President & Chief Executive Officer, as saying The Duvernay project will combine Phoenix’s integrated upstream and downstream capabilities and financial resources with Encana’s proven resource play hub expertise. This joint venture will build a foundation for the successful development of the Duvernay play and help to diversify our business portfolio. Encana is our ideal long term partner for the development of our future natural gas business.”

The company goes on to say:

Having entered into several joint venture transactions in 2012, these types of arrangements have become an important part of Encana’s business model. Joint ventures help the Company to achieve a highly efficient deployment of capital throughout its vast exploration and development asset base as Encana transitions to a more diversified portfolio of commodities.

Significantly, the Encana release, while talking about LNG development and export, it makes no mention of the Kitimat KM LNG project, instead looking south to Louisiana.

These relationships have the potential to increase natural gas demand as a number of Encana’s partners are actively exploring opportunities to export liquefied natural gas (LNG), while some are industrial consumers looking to transition to natural gas as fuel for their operations. An example is a recent agreement with Nucor Energy Holdings (Nucor) which is designed to support Nucor’s increased use of natural gas for its facilities, such as its direct reduced iron facility currently under construction in Convent, Louisiana.

Reports say PetroChina paid a premium price for the Australian Browse natural gas project, anticipating that if it comes on stream, as planned in 2018, the current glut in the natural gas market will have eased and once again LNG will be a seller’s market.

The Browse project at James Price Point on the north-western coast of Australia is facing similar opposition to projects in British Columbia, including some of the site’s aboriginal landowners and from some environmental groups.

The opposition to the Australian Browse project, according to reports, reflects a split in the local aboriginal community. While Wikipedia says that 60 per cent of the local aboriginal people voted in favour of the project, there is also fierce opposition, according to the Australian Mining Journal, which reported in 2009:

[A] number of Traditional Owners, as part of the Save The Kimberley organisation, issued a statement which said there is not unanimous support for this site.

In a signed declaration, Traditional Owners have affirmed that they do not support the imposition of an industrial site on their country and will legally challenge the authenticity of any agreements entered into by the Kimberley Land Council supporting the proposal.

The statement said that “…many local Indigenous people are disgusted by the apparent abandonment of the established process put in place by the previous State government. Concerns include the threats made earlier in the year by the Premier regarding compulsory acquisition of land and the pre-empting of the Joint State and Commonwealth environmental and cultural assessment process via announcements by Woodside and the Premier.”

A company called Woodside Petroleum, which leads the LNG venture wants to build the “greenfield” onshore terminal but is facing competition from Shell’s proposed offshore floating LNG “given the land access challenges and soaring development costs in Australia,” even though Shell also has a stake in the Browse project.

The Encana PetroChina deal comes a week after the Conservative government approved the takeover of Nexen by the China National Offshore Oil Corporation (CNOOC) and the take over by the Malaysian state oil company Petronas of Progress Energy. Petronas and Progress Energy have announced plans for an LNG export facilty at Lelu Island, opposite Port Edward, near Prince
Encana spokesman Jay Averill told the Globe and Mail the Duvernay deal will not need approval from Investment Canada because PetroChina will only gain a 49.9-per-cent, non-controlling share of the specific Encana assets.

In Australia, in October, CNOOC bought a stake in Queensland Curtis LNG from British energy company BG. BG, in partnership with Spectra Energy has also announced plans for an LNG facility at Prince Rupert

Related links

Petroleum Economist
PetroChina pays premium for Browse stake

Calgary Herald

PetroChina inks $2.18B deal with Encana Joint venture to invest $4 billion to develop Alberta Duvernay

Four energy giants update multi-billion dollar Alaska LNG development plans

An alliance of four energy companies has updated plans for a multi-billion dollar, ten-year liquefied natural gas megaproject that would take gas from Alaska’s North Slope for shipment to Asia through the oil port at Valdez.

Three of the companies, Exxon Mobile, ConocoPhillips and BP already have operations on the North Slope. TransCanada,which is already planning to build a gas pipeline for the Kitimat Shell project, would be the fourth partner and also work on the pipeline.

The four companies filed a letter on October 1 with Alaska Governor Sean Parnell outlining the plans, The governor’s office released the letter today.

The companies told Gov. Parnell that their efforts would result in “a megaproject of unprecedented scale and challenge; up to 1.7 million tons of steel, a peak construction workforce of up to 15,000, a permanent workforce of over 1,000 in Alaska, and an estimated total cost in today’s dollars of $45 to $65+ billion.”

The letter goes on to say that TransCanada’s recently completed non-binding solicitation of
interest in the project and that company “has publicly reported interest from potential shippers and major players from a broad range of industry sectors and geographic locations.” (An expression of interest, of course, doesn’t mean that buyers will actually sign contracts, as the Kitimat LNG partners are finding out)

It appears from the letter that the North Slope producers are, in the long term, worried about diminishing oil reserves and are now, like energy companies around the world, looking at cashing in on the natural gas boom.

This opportunity is challenged by its cost, scale, long project lead times, and reliance upon interdependent oil and gas operations with declining production. The facilities currently used for producing oil need to be available over the long-term for producing the associated gas for an LNG project. For these reasons, a healthy, long-term oil business, underpinned by a competitive fiscal framework and LNG project fiscal terms that also address AGIA issues [an Alaska state agency], is required to monetize North Slope natural gas resources. The producers look forward to working with the State to secure fiscal terms necessary to support the unprecedented commitments required for a project of this scope and magnitude and bring the benefits of North Slope gas development to Alaska.

Over the past few months, the partners have, according to the letter:

•Developing a design basis for the pipeline, including areas of continuous and discontinuous permafrost
•Investigating multiple ways to remove and dispose of CO2 and other contaminants
•Assessing use of existing and addition of new Prudhoe Bay field facilities
•Mapping multiple pipeline routing variations
•Assessing multiple pipeline sizes
•Providing for at least five in-state gas off-take points
•Completing preliminary geohazard and marine analysis of 22 LNG site locations
•Developing a design basis for the required LNG tanker fleet
•Evaluating multiple LNG process design alternatives
•Confirming a range of gas blends from the Prudhoe Bay and Point Thomson fields can generate a marketable LNG product

The letter concludes:

Our next steps are to complete the concept selection phase and work with the State to make meaningful progress on the items detailed above. This work is critical as we consider decisions to progress the next phases of an LNG development project.

Alaska’s North Slope natural gas resources must compete in the global energy markets in order to deliver state revenues, in-state energy supplies, new job opportunities and other economic benefits to Alaskans. While North Slope gas commercialization is challenging, working together, we can maintain the momentum toward our shared vision for Alaska. We will continue to keep you advised of our progress and stand committed to work with the State to responsibly develop its considerable resources.

Alaska LNG fact sheet — A fact sheet on the Alaska LNG project sent to the state governor by the project partners.

LNG partners letter to Alaska governor (PDF)

TransCanada to hold community briefing in Kitimat October 15

TransCanada will hold a community briefing in Kitimat on October 15, 2012, at Riverlodge to inform residents of its plans for its subsidiary Coastal GasLink Pipeline, which would carry natural gas for the Royal Dutch Shell LNG project.

In a letter to District of Kitimat Council, TransCanada said it the Kitimat would be one of several sessions across northern British Columbia.

The public information session will include maps “showing our conceptual route as well as information on community benefits, environmental management and other aspects of our project. Coastal Gaslink project representatives will be available to answer questions and share information.”

The session will be a the Riverlodge Rescreation Centre from 4:30 p.m. to 8:30 p.m. On October 15.