In its February 2009 report, Liquefied Natural Gas: A Canadian Perspective, the National Energy Board agrees. “As a potential LNG supplier, an export terminal on Canada’s west coast would benefit from having a relatively short distance and low shipping cost to markets in East Asia and on the west coast of the U.S. and Mexico,” the authors write. “From a transportation cost perspective, shipping costs from the west coast of Canada to Asian markets would be competitive with that from most other Asia-Pacific supply regions, with the exception of Russia.” Considering a potential climb in world crude prices in three or four years when Canada’s west coast LNG would come on stream would bode well.

Although the world’s LNG fleet has grown nearly four-fold from about 80 vessels to 300 in the last decade, Far Eastern markets remain attractive. According to the NEB report, although East Asia accounts for less than 10 per cent of world natural gas consumption, it is by far the largest market for LNG. The region accounts for almost two-thirds of global LNG consumption. As of 2007, Japan and South Korea, the world’s two largest LNG consumers, had annual imports of 3.1 trillion cubic feet and 1.1 trillion respectively. And emerging countries like Thailand and Indonesia are looking to import more.

Statistics like these haven’t gone unnoticed by a couple of companies active in potential LNG projects for the port of Kitimat.

The lineup includes Pacific Trails Pipelines’ proposed KSL (Kitimat Summit Lake) project. The plan calls for a line 36 inches (90 centimeters) in diameter to transport one billion cubic feet per day, enabling it to tap into new production expected in northeastern B.C.

The Kitimat LNG project is another proposed part of the growing B.C. gas network. Its president Rosemary Boulton fully expects future increases as the large new gas plays in B.C. come on stream. “At the same time, the U.S. gas supply is increasing, thanks to the rise of unconventional gas,” she says. “It is imperative that Canada find new export markets as the increase in U.S. supply reduces demand for Canadian natural gas in the U.S.”

She says Asia is a long-term, stable market for LNG that has consistently paid a premium to North American gas prices. “The Kitimat LNG terminal will enable Canadian natural gas producers to access these valuable Asian markets,” she says. The company is currently in confidential, proprietary discussions regarding equity, off-take and capacity for the terminal, she says, and has received interest in all three areas. Aiming to capitalize on shorter sailing times and lower shipping costs to Asia than other Atlantic Basin or Middle Eastern supplies, Kitimat LNG is seeking long-term contracts with pricing that reflects the JCC, trading on the New York Mercantile Exchange or a combination of the two, says Boulton. The formula approach would inject an element of stability, enabling participants in the trade to avoid depending on volatile LNG spot markets.

Decision time on Kitimat LNG’s export project is approaching: “We are looking at starting construction in 2010, with completion in 2013,” Boulton says. “All environmental approvals from the federal and provincial governments have been received for the Kitimat LNG terminal.”

That startup date is also dependent upon completion of the Pacific Trails Pipeline. It has received federal and provincial environmental approvals, Boulton points out. PTP is a 50/50 joint partnership between Pacific Northern Gas Ltd. and Galveston LNG Inc., the parent company of Kitimat LNG.

Another project in the works to ship LNG out of Kitimat is to moor a self-contained liquefaction ship offshore to liquefy the product on board and ship it out to Asian markets. Teekay Corporation, a world shipping conglomerate, announced in mid-March it had reached agreement with Merrill Lynch Commodities to work together on developing such a scheme.

At Ziff Energy, Gwozd says a gas factory ship is not a brand new idea but has great merit, as potentially creating flexibility to move stranded gas from other regions of the world as well. “They still need a lot of support from industry.”

From the point of view of an industry openly wondering, through leaders like CAPP’s Collyer, about the future of the U.S. energy trade, a green light from the NEB for all these ambitious projects would be a welcome development. For Canada’s producers, the proposed new delivery services add up to flexibility in oil and gas markets and ample capacity to get it there, and will change forever the face of Canadian energy exports.

Pages: 1 2 3 4

Related Posts

• Apache Canada leads a global push for Canadian gas
• Export visions stoke deep divisons in a coastal town
• Border Patrol
• Shell proposes 12 mmtpa LNG plant for West Coast
• LNG a catalyst for M&A on Canada’s West Coast