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Canadian LNG plunge ExxonMobil/Imperial, BG Group enter export race with NEB applications Gary Park For Petroleum News
Two global LNG giants — ExxonMobil (along with Imperial Oil, its Canadian unit) and the United Kingdom’s BG Group — have decided they can’t afford to dither over their Canadian LNG ventures as Royal Dutch Shell, Malaysia’s Petronas and Chevron advance their own megaprojects.
In applications to Canada’s National Energy Board, ExxonMobil has lifted the veil on plans to export up to 30 million metric tons a year, while BG is targeting 21.6 million metric tons, with both operators putting out word that they are open to partnerships. Both want regulatory permits covering 25 years.
The jointly owned ExxonMobil-Imperial project will be known as WCC LNG Ltd. and, depending on the necessary approvals and customer off-take agreements, is aiming to introduce the first of six separate trains in the 2021-23 period.
The remaining trains, to achieve full export capacity, are anticipated to be commissioned successively following the commissioning of an LNG terminal at either Kitimat or Prince Rupert.
Once a site is selected, work will start on the liquefaction terminal that will be designed to process 1.46 trillion cubic feet of gas a year.
Timing subject to variables WCC cautions that timing could be influenced by a number of variables including project economics and available pipeline capacity to the British Columbia coast.
The proponents say they are considering several pipeline options to deliver the gas from North American gas fields, ranging from existing pipelines, expansions or new third-party facilities.
WCC said it has entered into agreements with several pipeline companies it did not identify regarding services for the delivery of gas to the terminal.
WCC said the terminal will be designed to take shipments of gas primarily from the Western Canada Sedimentary Basin, but “given the integrated nature of the North American gas markets and pipeline network, gas supply could also potentially come from other Canadian or North American basins over the life of the LNG terminal.”
Over the term of the export licenses WCC is seeking, LNG exports would not exceed 800 million metric tons, the natural gas equivalent of 38.9 TCF based on an annual maximum quantity of 30 million metric tons in any 12 month period.
Over the past eight years, ExxonMobil and its affiliates have or are participating in the construction and operation of four LNG projects in Qatar, Australia and Papua New Guinea exceeding US$10 billion and in which they have an ownership interest of more than 25 percent, with capacity from those projects of about 65 million metric tons a year at the end of 2012.
An Imperial spokesman said it is too early to attach a price estimate to the project because a final investment decision is a “fair ways” off.
Regulatory approval needed First the joint venture needs regulatory approvals and a chance to determine contracts and relationships with customers and suppliers, he said.
Imperial Chief Executive Officer Richard Kruger said the partners are open to working with other players in British Columbia’s fast-growing LNG scene to create a better project.
“We look to manage risks,” he said. “We look to ensure we have the most profitable projects we can. And if that could include sharing infrastructure, sharing logistic, economies of scale on plants, we’ll look at all those levers than can make a project most attractive to us.”
Kruger said he could not speculate on what roles other companies might fill.
ExxonMobil and Imperial already have a large landholding in northeastern British Columbia’s Horn River basin, recently augmented by a C$3.1 billion acquisition of Celtic Exploration, which has shale gas holdings in the Montney formation of British Columbia and the Duvernay formation of Alberta.
Kruger said he is not concerned about the number of other LNG projects in the mix or the possibility of the door closing on ExxonMobil-Imperial.
“When you’re advancing something like an LNG project with its significant cost and all, we certainly pay attention to what others are doing, but our own progress and plans aren’t driven” by those considerations, he said.
However, he conceded “it’s a safe assumption to say they won’t all come to fruition.”
BG looking at 1.06 tcf a year In its regulatory filing, BG estimated it would need about 2.9 billion cubic feet per day of gas, or 1.06 tcf a year, compared with Canada’s current gas output of 13 bcf a day or 4.75 tcf for the entire year.
It hopes to develop the C$16 billion project in two trains, each with equal capacity, with the first phase scheduled to start exports in 2020.
BG said it expects an estimated 189 LNG tankers a year would use the facilities.
It said the project would create supply opportunities for Western Canadian producers and lead to timely and efficient development of the region’s gas resources.
BG spokesman David Byford told the Financial Post that “we’re definitely looking at options around partnerships,” while BG’s Chief Executive Officer Chris Finlayson said in mid-May that his company ultimately anticipates having less than a 50 percent stake in the project.
Unlike Shell, Chevron, Petronas, or ExxonMobil-Imperial, BG owns no gas reserves in Canada, but it hopes to secure volumes through a combination of market purchases and swaps and bilateral gas supply contracts with producers in Western Canada.
Byford said BG is also considering upstream acquisitions.
Calgary-based Ziff Energy Group, which contributed to the BG application, is counting on Canadian production soaring to 24 bcf per day by 2050.
Robert Mark, an analyst at the Toronto law firm of MacDougall MacDougall & MacTier, said Asian buyers insist on “security of supply. They’re not going to take a flyer than some guy’s going to be able to use derivative markets to adequately source the gas. But because it’s BG I think you might have a bit more ability to maneuver.”
BG has partnered with Spectra Energy to build a pipeline to Ridley Island near Prince Rupert from the Cypress area of northeastern British Columbia and has contracted for the entire capacity of the pipeline.
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