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Fresh start lifts LNG project; Douglas Channel could start in ’18
Of all the 18 LNG projects in the works for British Columbia none has had a longer or more erratic history than the one now known as Douglas Channel LNG.
But the venture may also be one of the closest to entering the commercial phase after an ownership shuffle which the consortium says clears the way for a startup in 2018, with initial exports of 550,000 metric tons per year.
Douglas Channel actually started out as an import scheme until the spectacular emergence of shale gas in British Columbia eliminated the need for any gas imports to Canada.
Having apparently survived insolvency proceedings in the British Columbia Supreme Court, the partnership now consists of Calgary-based AltaGas, Japan’s Idemitsu Kosan, EDF Trading (a unit of Electricte de France) and Belgium-based LNG shipper Exmar.
FID later this year The companies say they expect to make a final investment decision later this year.
John Rittenhouse, an EDF Trading executive, said Douglas Channel is “well positioned to be an early exporter of LNG off the West Coast of Canada with unique competitive advantages.”
Matthew Arnold, EDT Trading’s global head of LNG and LPG, said the smaller scale project will “utilize existing pipeline infrastructure, proven barge technology and very short shipping distances to target markets. We will be working without Asian customers to a secure a long-term contract.”
Hisao Sato, general manager of Idemitsu, said Japanese buyers of the LNG are expected to demonstrate British Columbia’s “ability to quickly deliver scaleable LNG.”
Long-term leases The consortium has also executed long-term lease agreements with the Haisla Nation of northwestern British Columbia for land and water tenure and a 20-year contract with Pacific Northern Gas to deliver the feedstock gas to a terminal at Kitimat.
The C$500 million project is designed to be a large barge-based LNG facility with land and foreshore access to allow future expansion.
Exmar, which has 35 years’ experience in LNG shipping, will develop and operate the floating liquefaction facility, drawing on its role as the owner and operator of the world’s first floating liquefaction facility in the Caribbean, while EDF Trading’s parent company has 39 million customers worldwide.
Court-sanctioned reorganization AltaGas, which played a lead role in salvaging the terminal, took the initiative in negotiating a court-sanctioned reorganization of Douglas Channel by dividing the venture in half to resolve a dispute with creditors owed C$100 million.
British Columbia’s Natural Gas Development Minister Rich Coleman said the province welcomed the news that the transfer of ownership has been completed, allowing plans to move forward.
“AltaGas, who helped lead the parties to this positive outcome, has been a strong proponent for LNG in British Columbia,” he said. “They are firmly committed to the project.”
Coleman said the government will work closely with the proponent, the community and First Nations “to help them reach a final investment decision.”
Grassy Point approval He also welcomed word earlier in February that Grassy Point LNG has received approval from Canada’s National Energy Board to initially make annual exports of 20 million metric tons, or just over 1 trillion cubic feet of natural gas, over 25 years, making it the tenth LNG project in the province to get an export license.
As with all earlier approvals, the NEB said the quantity of gas to be exported would be surplus to Canadian needs.
Grassy Point, which plans to build a terminal near Prince Rupert, is one of two projects involving Woodside, Australia’s largest independent oil and gas company, which is also a joint partner with Chevron in the Kitimat LNG project.
Grassy Point, which carries an initial price tag of C$10 billion to C$15 billion, has also filed to an environmental assessment certificate from the British Columbia government.
It is not yet clear whether Woodside will pursue both projects simultaneously.
East Coast projects On Canada’s East Coast, where three LNG proposals have been announced, there is a call for the Canadian government to negotiate a national energy strategy with the provinces to overcome what Alfred Sorensen, chief executive officer of Pieridae Energy, said is the greatest barrier to attracting foreign buyers and investors.
Pieridae, which plans to build an LNG terminal in Nova Scotia, has signed a 20-year deal to sell an estimated C$35 billion worth of LNG to Germany.
Sorenson said the greatest difficulty for outsiders is to “understand how our country works,” especially given that provinces own and control the development of their natural resources, while the federal government has jurisdiction over approving exports.
International Trade Minister Ed Fast said Sorensen’s critique is wrong, noting that he spends considerable time conveying the message to foreign companies and governments that “Canada is open for business.”
He said the fact that British Columbia alone has been able to attract 18 LNG proposals shows the “tremendous interest in investing in Canada” by companies that view Canada as a “safe, stable and predictable place for their investment.”
- Gary Park
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