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More backing for Canadian LNG project
Gary Park For Petroleum News
Drowned out by the noise from its much larger rivals, Canada’s smallest LNG export project has attracted two new international financiers and is now getting serious about expanding its plans to the maximum permitted size.
The partnership mix for the Douglas Channel project, operated by BC LNG Export Cooperative, now consists of Golar LNG, a Bermuda-based owner of global LNG vessels; an unnamed Asian investor; the Haisla First Nation of northwestern British Columbia; and Houston-based LNG Partners.
Golar said it has secured a minimum 25 percent of the project and disclosed the partnership is exploring the possibility of adding a second train of 1.1 million metric tons per year to the 700,000 metric tons of LNG exports planned for the initial phase.
Canada’s National Energy Board has already approved annual export permits for a maximum 1.8 million metric tons over 20 years.
The project is in the final engineering stages, targeting an investment decision in the third quarter, a construction start this winter, with Asian-built liquefaction equipment being delivered by barge to the terminal site at Kitimat, and a start up in late 2015 or early 2016.
LNG vessels committed Golar, which has already committed some of its LNG vessels to BC LNG, said in its first-quarter report the deal is a “significant stepping stone for further opportunities” in British Columbia.
The Haisla First Nation said in a statement May 31 the new partners are primarily attracted by the economics of selling British Columbia gas into the Asian marketplace and have gained confidence from the re-election on May 14 of British Columbia’s pro-LNG Liberal government.
BC LNG said it has deals in place to sell its LNG to unidentified buyers in Asia based on North American gas prices, rather than the higher oil-index prices being sought by other North American LNG proponents and resisted by Asian buyers.
Problems negotiating the more lucrative sales contracts have stalled final decisions on a number of projects, including the Chevron-operated Kitimat venture.
Customers take hard line The hard line by prospective customers is posing a threat to several international projects, especially in Australia where rising construction costs have caused the Australian Petroleum Production and Exploration Association to raise concerns about the future of operations costing an estimated US$96 billion.
Haisla Chief Councilor Ellis Ross said in the statement that the new Douglas Channel partnership arrangement means that one of the “biggest hurdles” to proceeding is close to being removed.
He said Golar and the Asian company “will work with us and LNG Partners to carry the project through permitting and a final investment decision.”
Final engineering work is required to provide an accurate cost estimate, which has been tagged at about C$500 million.
The Haisla said it has enough confidence in the project that it expects to commit itself by the end of July to a 20-year shipping agreement on the Pacific Natural Gas 10-inch-diameter mainline from gas fields in northeastern British Columbia and northern Alberta to the LNG terminal site about six miles from Kitimat.
British Columbia Energy Minister Rich Coleman said in a statement that the ownership deal for Douglas Channel is an “early indicator” that some of the major LNG projects being developed for his province will make final investment decisions “over the next few months.”
He said “billions of dollars” of investments have been “sitting on the sidelines” were waiting for the outcome of the British Columbia election.
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