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Vol. 18, No. 45 Week of November 10, 2013
Providing coverage of Alaska and northern Canada's oil and gas industry

Two LNG permits sought

Idemitsu, AltaGas apply to Canadian National Energy Board; 3 licenses granted

Gary Park

For Petroleum News

Another key piece has been moved into place in British Columbia’s liquefied natural gas picture, with Japan’s Idemitsu and Canada’s AltaGas applying to the National Energy Board for the fourth export permit.

The partnership, known as Triton LNG, is also working toward a final investment decision on liquefied petroleum gas, LPG, exports, while Idemitsu, Japan’s second largest petroleum company, is developing plans to export crude and oil products from Canada.

The ventures lend weight to a bilateral Canada-Japan oil and gas cooperation pact that was signed in October.

Natural Gas Development Minister Rich Coleman quickly took action to extend the working relationship by making a 12-day trip to South Korea, China and Malaysia in late October in an effort to secure Asian LNG investments.

Idemitsu and AltaGas announced they are looking for a 25-year license to ship up to2.3 million metric tons a year, or the natural gas equivalent of 115 billion cubic feet, starting in 2017.

The quantity of LNG to be exported over the term would not exceed 58 million metric tons, equivalent to 2.88 trillion cubic feet of gas.

Shipments would be made from a floating plant at Kitimat.

Three licenses awarded

Export licenses have so far been awarded to Shell Canada’s LNG Canada project, which has planned capacity of 12 million metric tons a year; Chevron’s Kitimat LNG, with two trains totaling 11 million metric tons a year; and the BC LNG Cooperative with 900,000 metric tons a year.

In addition to Triton, another nine projects are in various stages of planning and study.

Idemitsu’s parent company had consolidated net sales of C$47 billion in 2012, primarily from refining, manufacturing and the sale of petroleum, lubricants and petrochemicals, while AltaGas, which has a diversified energy infrastructure business, and an enterprise value of about C$7.5 billion.

Idemitsu Chief Executive Officer Takashi Tsukioka said his company is examining the possible export of bitumen and synthetic crudes from British Columbia by gaining third-party access to refineries.

He said the exports could also include oil products from Canada and the United States West Coast by executing products swap deals.

The company said it expects to make a final investment decision in 2014 for Canadian LP exports of propane and butane of 600,000-700,000 metric tons a year, starting in 2016. The shipments would be made from an LPG plant at either Prince Rupert or Kitimat.

Encouragement to move quickly

Despite British Columbia’s bullish outlook on LNG, it received a sharp prod from the Canada West Foundation, an independent think tanks, over its need to move quickly and aggressively to beat out the competition and capture market share in Asia.

Len Coad, co-author of a foundation study and director of the Center for Natural Resources Policy, said world LNG demand has grown by more than 7.5 percent a year for the past decade and is predicted to surpass 400 million metric tons a year by 2021.

“While this appears to be a sure thing for British Columbia, success hinges on multiple factors — including timing, pricing, cost and shale gas resources in China,” he said.

The study warned that competition among projects and other suppliers will put downward pressure on potential revenues and the number of projects that will successfully move forward.

It suggested that if British Columbia is to make the most of its opportunity, it will need to take four steps:

• Ensure the British Columbia government and the industry are positioned to outmaneuver competitors.

• Prepare for a more modest natural gas boom in the event that projected production and revenues build more slowly.

• Pay greater attention to risks facing the industry such as supply and transportation costs to ensure that price competitiveness is maintained.

• Continue to focus on other opportunities for natural resource development.

Coad suggested that by 2025 “there may be more gas available to Asian buyers than they will need. This means that British Columbia will face strong competition.”

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