Apache seeks LNG Kitimat export permit Customers still being sought; MOUs under discussion with Korea Gas, Spain’s Gas Natural; progress toward First Nation backing Gary Park For Petroleum News
Apache, with EOG Resources as its partner, has moved a step closer to exporting LNG through the British Columbia port at Kitimat by applying to Canada’s National Energy Board for a 20-year permit covering 10 million metric tons per year. It hopes for a regulatory decision in the next 12 months.
Janine McArdle, president of Apache affiliate KM LNG, said approval will “demonstrate Canadian LNG is a secure and reliable source of supply that can compete for market share in the Asia Pacific region.”
But Apache as 51 percent operator of the proposed C$3.5 billion project and EOG, as a 49 percent partner, are still trying to line up enough customers to make the project viable and bring it online in 2015.
MOUs under discussion A spokeswoman for Apache’s Canadian division said memorandums of understanding with Korea Gas for 40 percent of the LNG and Spain’s Gas Natural for 30 percent are still under discussion and haven’t reached the point of firm deals.
She said the partnership is confident it will be “in good stead” for the plant to open in 2015.
Although Kitimat LNG will face competition in Asia from other LNG suppliers, notably Russia, the Middle East and Australia, it is confident the project is backed by “a great supply of gas (from Canada and North America) and a very stable political environment,” the spokeswoman said.
Adding to the global LNG supply mix, two export projects have been proposed for the United States to siphon off the expected glut of production from shale gas.
Export proposed from Sabine Pass Cheniere Energy is seeking approval to add an export element to its existing Sabine Pass import terminal in Louisiana. It plans to file with regulators in February 2011 for permission to export 1.4 billion cubic feet per day of the plant’s designed capacity of 4 billion cubic feet per day.
Freeport LNG and Australia’s Macquarie Bank have teamed up with a proposal to export 1.4 billion cubic feet per day from a Texas plant, targeting the Asia-Pacific region. If approved, the $2 billion export facility will be located alongside an import terminal and will use U.S.-produced gas.
Apache’s website said Kitimat LNG plans to conduct front-end engineering and design in 2011. If it then decides to proceed, construction is expected to start in 2012.
Peter Stass, an analyst with Investment Daily, said that although Kitimat faces higher construction costs than the Cheniere project, its location offers reduced shipping times from North America to Asia.
First Nation backing To date, Kitimat LNG has made progress in seeking First Nations backing, unlike Enbridge’s Northern Gateway project, which faces heated opposition from a coalition of 61 First Nations.
In November, the Haisla Nation of northern British Columbia voted overwhelmingly in favor of leasing land required for construction and operation of a terminal at Bish Cove near Kitimat, scheduling a lease signing for January. Federal and provincial environmental authorizations have also been obtained for the terminal.
Haisla Chief Dolores Pollard said the project offers “a brighter economic future for our community.”
In a separate deal last April, 15 First Nations signed a deal with the British Columbia government to take a 30 percent equity stake in the proposed C$1.2 billion Pacific Trail Pipeline, which is expected to carry an initial 700 million cubic feet per day of gas from the Horn River shale gas field for liquefaction at Bish Cove.
David Luggi, chief of the Carrier Sekani Tribal Council said the announcement is “testimony that industry, First Nations and government can work together on projects that will result in financial returns, gainful employment and associated opportunities that will benefit First Nations for years to come.”
It is estimated that an ownership stake would generate C$522.5 million for First Nations partners over the first 30 years of the pipeline’s operation.
Enbridge has since offered First Nations 10 percent equity in Northern Gateway.
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