Shuffling and maneuvering among the key players in British Columbia’s LNG field continues unabated.
The latest developments that reinforce who the serious contenders are — assuming the pundits are accurate that no more than three of a dozen large-scale ventures will ever get to the starting line — involve Malaysian global super-major Petronas and Canadian pipeline power Enbridge.
But trouble is looming for what is supposed to be the lead off project.
The minnow BC LNG Cooperative venture, which was scheduled to start exports by either late 2015 or early 2016, is suddenly seeking court approval to reorganize under the Companies’ Creditors Arrangement Act, which allows financially-troubled corporations to juggle their affairs.
Operator Houston-based equity firm LNG Partners, with the Haisla First Nation and Bermuda-based shipping company Golar as partners, is unable to pay its creditors more than C$100 million, according to a Supreme Court of British Columbia filing.
LNG Partners is reportedly seeking an agreement with Calgary-based utility AltaGas, along with Belgium-based Exmar NV and gas marketer EDT Trading, leaving the Haisla and Golar to pursue a separate project.
Rounding up gas
State-owned Petronas, operator of the Pacific NorthWest LNG project, showed how serious it is about rounding up natural gas sources in British Columbia by closing its previously announced acquisition, along with C$130 million for additional acreage in the prolific Montney formation.
Progress Energy Canada, the Petronas unit that is driving the search for gas, said in a March 12 release that the new element of the asset accumulation covers 33,500 undeveloped acres in the Julienne area of northeastern British Columbia.
The company did not identify the seller, but Calgary-based Enerplus said late last year that it was selling Julienne Montney assets for C$130 million to an unnamed buyer.
Chief Executive Officer Michael Culbert said the acquisitions set the stage for Progress Energy to “build on our natural gas resource base in the north Montney” through assets that he described as “strategic” and capturing “operational synergies.”
The Talisman transaction includes 127,000 net acres of Montney lands and has current production of 12,500 barrels of oil equivalent per day in the Kobes area, where Progress Energy has existing joint operations with Talisman.
In addition, Progress will acquire Talisman’s 50 percent stake in the Farrell and Cypress areas.
Under the terms of the agreement, there is a “capital carry” of C$870 million that will be used to fund the majority of Progress Energy’s share of upstream capital investments in the joint venture area and will offset the acquisition cost of about C$1.5 billion.
Earlier in March, Pacific NorthWest filed it project applications with the British Columbia and Canadian environmental assessment agencies, setting in motion a 180-day review of the initial C$11 billion phase of the project.
Enbridge acquires land
In a separate deal, Enbridge said it has paid C$20 million for land on the northern British Columbia coast that hints it plans to enter the LNG arena.
The 160 acres is at Grassy Point alongside land blocks where Australia’s Woodside paid C$17 million for about 2,500 acres and Nexen, owned by China National Offshore Oil Corp., has agreed to pay C$24 million for almost 2,000 acres to acquire the provincially owned land from the British Columbia government.
Enbridge competitors TransCanada, Spectra Energy and Pacific Northern Gas have already secured stakes in pipeline plans to deliver gas to liquefaction plants on the Pacific coast.
But Enbridge will not disclose what plans it has for the land beyond saying it is “always looking for possible business opportunities.”
That lends weight to comments Chief Executive Officer Al Monaco made to an investors conference last fall that Enbridge was engaged in “very preliminary” discussions with producers to deliver gas to LNG terminals.
Fiscal issue
The stumbling BC LNG Cooperative points to growing concerns within British Columbia’s LNG sector as the major players stall on final investment decisions, pending a final resolution of the provincial government’s planned fiscal regime.
So far British Columbia’s framework for a two-tier tax has failed to gather the unanimous support of LNG operators and the signs of confusion within the BC LNG Cooperative lend weight to those who have claimed that LNG projects need those with deep pockets and long experience.
The venture has National Energy Board approval to export as much as 1.8 million metric tons per year from two trains for an initial capital outlay of C$500 million.
The Haisla First Nation could not be reached for comment and AltaGas was keeping tight-lipped.
AltaGas, in a joint venture with Japan’s Idemitsu Kosan, is separately working on the Triton LNG project to export 2.32 million metric tons per year of LNG and is also planning to ship LPG over 25 years, starting in 2017.
It has also negotiated transportation agreements with BC LNG Cooperative to expand its Pacific Northern Gas pipeline from northeastern British Columbia to a liquefaction terminal at Kitimat’s deepwater port.
