Canadian Export Project Signals Quick Shift for North American Discoveries
By Ben Casselman
10 August, 2009
The Wall Street Journal
Houston-based Apache Corp. has agreed to provide natural gas for export to Asia through a proposed project in Canada, the latest sign that huge gas discoveries in North America are reshaping global energy markets.
Kitimat LNG Inc., the Canadian company planning to build the liquefied-natural-gas export terminal in Kitimat, British Columbia, will announce Monday that Apache has become the second major North American gas producer to sign on to the project. Last month, another Houston-based gas producer, EOG Resources Inc., signed a similar deal.
If the Kitimat project is completed in 2013 or early 2014, as planned, it would be the only North American LNG export terminal south of Alaska. The terminal would be in the ideal location for serving Asia, where gas prices are higher than in the U.S. because demand is stronger and sales contracts are usually linked to the price of oil, which is higher than the price of gas.
I guess the Kitimat terminal is going to be supplied by Montney shale gas.
Not many seem to know the US has had a LNG export terminal in Kenai, AK for 40 years (see link below). Making one wonder if the AGIA pipeline might become an export terminal pipeline someday?
"We're pretty excited about the potential to open up some other markets," said John Crum, president of Apache's North American operations.
Apache and other British Columbia gas producers are looking for buyers for the trillions of cubic feet of natural gas they expect to pump in coming years. Apache recently said it could drill as many as 3,000 wells in British Columbia with the potential to produce 10 billion cubic feet of gas each. Other companies active in British Columbia include EnCana Corp., Devon Energy Corp. and industry giant Exxon Mobil Corp.
The Kitimat project is still in the planning stages, and the deals with Apache and EOG are memorandums of understanding -- essentially, agreements to negotiate. Nonetheless, the agreements underscore the rapid shift in the North American natural-gas market.
Just three years ago, most experts thought North American natural-gas production was in permanent decline and predicted the U.S. and Canada would become major importers of gas from overseas.
Instead, new technology led to the discovery of vast new gas fields from New York to Louisiana, sending gas production soaring and pushing down prices in the U.S. to below $4 per million British thermal units from more than $13 per million BTUs last summer.
Most gas producers have said they believe low prices are temporary, the result of weak demand due to the recession. The Kitimat project, however, is one of the first signs that some in the industry believe there is a long-term oversupply of gas in North America.
"We're confident that there's going to be plenty of gas available for export for a long time," said Greg Weeres, vice president of Pacific Northern Gas Ltd., which is planning to build a pipeline to supply gas to the Kitimat facility.
The Canadian project originally was conceived as an import terminal that would receive liquefied gas shipped from the Middle East and Australia, convert it back into a gas and transport it via pipelines to Canada and the western U.S.
But Kitimat LNG President Rosemary Boulton said the company, based in Calgary, realized about a year ago that new North American gas supplies made such a facility unnecessary. "Suddenly North America is awash in natural gas," Ms. Boulton said.
So in September, Kitimat announced it would build an export terminal instead.
Kitimat, which is backed by private-equity firm Denham Capital Management LP and others, isn't the first company to discuss exporting gas from North America. Last year, Chesapeake Energy Corp. said it had hired investment bankers to study exporting liquefied gas from the Gulf of Mexico.
Chesapeake Chief Executive Aubrey McClendon said in an interview that he ultimately decided to focus instead on trying to boost demand for natural gas in the U.S. But he expects operators of existing natural-gas import facilities to look into converting them to hybrid import-export terminals.
"I don't see how anybody can arrive at the conclusion that there is not a decades' long supply of natural gas," Mr. McClendon said.
The Kitimat facility will take about 700 million cubic feet a day of natural gas produced in Canada and supercool it to minus 256 degrees Fahrenheit, which converts the gas to a liquid. The liquefied gas can then be shipped to overseas markets. Kitimat has the necessary permits for the project, but still needs to raise the $2.5 billion to $3 billion to build it.
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The LNG spotlight over the past few years has focused on the feverish rush to build new terminals on the East, West and Gulf Coasts, all of which would be importing product. No one has paid any attention to the oldest LNG facility in the country, the Kenai LNG terminal in Nikiski, Alaska, which was built in 1969 and is the only LNG terminal in the U.S. to export gas.
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pipelineandgasjournal.com
DOE Approves Alaska LNG Export Application
June 11, 2008 // Published as a news service by IHS
The U.S. Department of Energy (DOE) approved an application for the continued export of liquefied natural gas (LNG) from the Kenai, Alaska LNG export terminal for a period of two years.
The application, submitted jointly by ConocoPhillips Alaska Natural Gas Corporation and Marathon Oil Company, requested authority to export up to 99 trillion British Thermal Units of LNG - the equivalent of 98.1 billion cubic feet of natural gas - to Japan and/or one or more countries on either side of the Pacific Rim over a two-year period commencing April 1, 2009 through March 31, 2011.
Under the authority of section three of the Natural Gas Act, any party desiring to import or export natural gas or LNG into or out of the U.S. is required to first obtain authorization from the secretary of energy.
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Source: U.S. Department of Energy (DOE) Office of Fossil Energy. |
