Kitimat LNG hunts for buyers

Partners in the Apache-led Kitimat LNG project are boldly pushing ahead with preliminary construction work, taking a lead role in Canada’s proposed LNG export developments, but final sanctioning will not take place until long-term sales contracts are in place. In an effort to stir interest in the Asian market, Apache and partners Encana and EOG Resources are dangling the prospect of a 20 percent equity stake to “substantial off-takers or major foundation buyers,” Apache LNG Vice President Doug Adams said in September.

David Calvert, another Apache vice president, told an energy roundtable in Calgary in early October that hopes of deals are at the point where the partnership is starting to clear a site for an LNG terminal at Kitimat and embark on a pipeline route before completing front-end engineering and design and making a final investment decision.

Sanctioning of full-scale development is tentatively targeted for the first quarter of 2013, with initial exports likely in 2017.

Calvert said Apache “remains convinced that oil-linked pricing is critical to the viability of our Canadian LNG industry.”

“The bottom line is for LNG producers to provide the stability buyers are looking for and for us to make the significant capital investments required for greenfield LNG projects we must have long-term contracts with prices that reflect these critical considerations and realities,” he said.

He said the recent decision by Cheniere Energy to contract the sale of gas from its proposed Louisiana export terminal based on North American gas prices is a dangerous precedent because of the discounted market on this continent.

Calvert said the deal based on Henry Hub pricing has created unrealistic expectations for products from the Kitimat project.

Adams insisted long-term contracts for Kitimat will be indexed to oil, which he said may disappoint buyers in northern Asia who have been drawn to North American projects in hopes of securing Henry Hub prices.

Other speakers at the roundtable said Australia is currently making the fastest progress in the race to Asian markets, with a report by GBI Research of New York predicting Australia will overtake Qatar as the world’s largest LNG producer by 2017, largely as a result of its deepwater natural gas drilling.

—Gary Park