|
Japan eyes BC gas to diversify energy Chubu Electric, Tokyo Gas, Osaka Gas each take 7.5% stake in Cordova Embayment; C$1 billion raised; goal diversification of imports Gary Park For Petroleum News
British Columbia gas owners are among the first beneficiaries of Japan’s moves to offset the loss of nuclear power in its energy mix.
Three Japanese utilities — Chubu Electric, Tokyo Gas and Osaka Gas — are each taking a 7.5 percent stake in Calgary-based Penn West Energy’s shale gas project in the Cordova Embayment of northeastern British Columbia.
The utilities said they have raised C$1 billion in project financing to join Cordova Gas Resources; a unit of Mitsubishi is a 50-50 partner with Penn West in the project. The loans come from Japan Bank of International Cooperation and Bank of Tokyo-Mitsubishi.
They said their participation is a way to diversify their energy import sources, although Tokyo Gas said there has been no decision on importing shale gas as LNG.
As yet, producers in the Cordova Embayment are still in the early stages of developing the play, while major LNG exports from Canada are at least four years away.
However, Penn West said Cordova has adequate infrastructure to handle future production, including its own processing plant with capacity for 125 million cubic feet per day and Spectra Energy’s gathering pipelines and processing facilities in and around the play.
Cordova similar to Horn River The British Columbia Energy Ministry ranks Cordova as similar to Horn River, with original gas-in-place of 200 trillion cubic feet.
Penn West has drilled more wells than any other operator and, along with Nexen, is conducting experimental schemes.
Along with the utilities’ participation, state-owned Japan Oil, Gas and Metals National Corp. has acquired a stake in another of Mitsubishi’s subsidiaries, Shale Gas Investment, which will indirectly give JOGMNC a 7.5 percent stake in Cordova Gas Resources.
The deal marks the initial entry into shale gas projects by Japanese power and gas utilities and JOGMNC.
The Penn West joint venture is targeting an increase in output to 500 million cubic feet per day — equivalent to 3.5 million metric tons a year of LNG — from 30 million cubic feet per day.
Mitsubishi, using third-party assessments, said the project’s resources are 5 trillion to 8 trillion cubic feet, or 100 million-160 million metric tons a year of LNG equivalent. LNG spot prices in Asia are currently about $13 per million British thermal units.
Existing pipeline eases costs A Tokyo Gas official said the costs for an LNG project would be eased because of an existing pipeline from the Cordova region to the British Columbia coast, thus reducing the need for major new infrastructure.
Mitsubishi said it plans to work with Penn West to promote development and production from Cordova over the next 50 years, partly through CIMA Energy, a United States-based gas marketing company in which Mitsubishi has a 34 percent stake.
Mitsubishi teamed up with Penn West last year, paying C$250 million for 50 percent of existing assets and agreeing to contribute C$250 million toward exploration and development.
Currently two LNG export projects are in the works for British Columbia — the Apache-operated Kitimat venture, which could come in service in 2015, liquefying 1.4 billion cubic feet per day, and U.S.-led BC LNG Export Cooperative, with plans to convert 125 million cubic feet per day, starting in 2013.
Mitsubishi and Korea Gas Corp. are working with Royal Dutch Shell on a possible 1.8 billion cubic feet per day project, while Talisman Energy and South Africa’s Sasol have not ruled out the LNG option for their joint production venture in British Columbia, although they would prefer to build a gas-to-liquids facility in Canada.
Scramble for LNG supplies The scramble among Asian countries to secure new LNG supplies is being intensified as Japanese utilities turn to oil- and LNG-generated electricity and away from nuclear power in the wake of the massive March 11 earthquake.
Chubu has suspended operations at two nuclear reactors near Tokyo at the request of Japanese Prime Minister Naoto Kan because of fears the facility could not withstand an anticipated magnitude 8 earthquake that is likely to strike near the plant with a probability of 87 percent in the next 30 years. It now estimates it will not be able to supply power to Tokyo in the peak summer demand season. Other Japanese nuclear operators have also shut in generating capacity.
| 