Archive | November, 2012

Apache Canada lacks ‘credibility’ in LNG market

29 Nov

From Alberta Oil Magazine

The developer of a major liquefied natural gas project on Australia’s east coast is open to collaborating with rivals to cut costs, amid warnings that escalating expenses could snuff out a projected gas boom in the southern continent.

Santos Ltd., which is developing the Gladstone LNG project in Queensland, said it wanted to “join forces” with rivals on a number of fronts, company chief executive officer David Knox told the Australian Broadcasting Corp. show Inside Business,according to Bloomberg.

He did not elaborate, but the willingness to partner with rival export schemes comes amid warnings that $156 billion in fresh investment is at risk because of cost inflation. It also serves as a potential lesson for Canada, whose budding LNG export plans face many of the same challenges sourcing labor and materials as Australia’s.

Edinburgh-based energy consultancy Wood Mackenzie recently noted, for example, that there is “room for project collaboration and consolidation” on Canada’s West Coast, where a half-dozen proposals to export frozen gas overseas are taking shape.

“We’re talking about easily a pretty fat bill for building these [greenfield] LNG trains,” said Asish Mohanty, a senior gas supply analyst with the firm.

Canada’s National Energy Board is currently reviewing an export application put forward by Shell Canada Ltd. Petronas, whose acquisition of Calgary intermediate Progress Energy Resources Corp. remains in limbo, is also said to be studying an LNG export option. So, too, are Exxon Mobil Corp. and BG Group plc.

Advisory firm Ernst & Young has pegged the tab for infrastructure needed to support those projects over the next decade as high as $50 billion.

Meanwhile, Apache Canada Ltd. and partners EOG Resources and Encana Corp. have struggled to ink sales deals with overseas buyers for their Kitimat LNG scheme, citing “unrealistic expectations” on prices.

“The Asians see that Kitimat LNG, as a partnership, doesn’t really have any partners with significant LNG experience, or an LNG portfolio that it can draw upon,” Mohanty said in an interview.

Apache and its partners “don’t bring that level of credibility in the marketplace. That’s why the market expects a discount on the LNG price,” he added. Potential buyers are “saying, ‘no, we can’t pay you high oil-indexed prices when we see a lot of risks to your implementation.’”


Duly Warned: Investors in pipeline given letter on behalf of Unist’ot’en

27 Nov

by Hillary Bain Lindsay – November, 27, 2012

TORONTO – Dozens of people gathered outside the Toronto headquarters of the Royal Bank of Canada (RBC) and Jarislowsky Fraser Limited (JFL) today to present the companies with letters of warning.

“This letter is to issue a warning of trespass to those companies associated with the PTP [Pacific Trails Pipeline] industrial extraction project and against any affiliates and contractors infringing upon traditional Wet’suwet’en territory.”  The letter is signed by Freda Huson, a spokesperson for the Unist’ot’en, a clan of the Wet’suwet’en nation.

RBC and JFL are the largest investors in Encana, one of the major partners in the PTP project.

Last week, surveyors working on the pipeline were evicted from Wet’suwet’en territory by Hereditary Chief Toghestiy.  The surveyors were issued an eagle feather, which in Wet’suwet’en law is used as a first and only notice of trespass.  

“Unist’ot’en and grassroots Wet’suwet’en have consistently stated that they will not allow such a pipeline to pass through their territory,” said Chief Toghestiy in a press release.  “The federal and provincial governments, as well as Indian Act tribal councils and bands, have no right or jurisdiction to approve development on Unist’ot’en lands.”  

“Wetsuwet’en territory, which extends from just East of Burns Lake to the Coastal Mountain range, is sovereign and unceded territory,” reads the letter. “The Wet’suwet’en are not under treaty with the Canadian government.”

Emergency rallies were held in Toronto and 12 other cities across Canada and the US today in a show of solidarity with the Unist’ot’en of Northern BC.  Sakura Saunders, one of the organizers of the Toronto rally and a member of Rising Tide Toronto, described the actions as “a show of strength of [Unist’ot’en] allies… to show the world they are supported.”

“The pipelines in BC have faced enormous resistance from indigenous and non-indigenous communities,” says Saunders.  “We are in solidarity with everyone who is trying to protect their lands from harm, and particularly with Indigenous communities who are also defending their sovereignty.”

“Under Wet’suwet’en law, the people of these lands have an inalienable right to their traditional territories, and the right to defend it,” reads the letter.  “Even by Canadian law, the Supreme Court Dalgamuukw case decision explicitly recognizes the authority of hereditary chiefs, not elected Indian Act bands or councils.

“As such, any further unauthorized incursion into traditional Wet’suwet’en territory will be considered an act of colonialism, and an act of aggression towards our sovereignty,” reads the letter.

“[RBC and JFL] need to note that by investing in these pipelines they are violating the self-determination of Indigenous nations,” says Saunders.  “It is an act of colonization and they have no right to do so.”

“It’s a bad investment,” she adds, “Because [the pipeline] is not going to happen.  There are very determined people that are going to ensure that it’s not going to happen.”

According to Saunders, today’s rallies are only the beginning of what PTP investors have to worry about. 

Republished from the Toronto Media Co-op:

Great Divide: The debate over natural gas and Site C heats up

27 Nov

James Waterman, November 15, 2012

Energy is becoming a very complex topic in British Columbia.

As BC Hydro is moving forward on their plans to build the Site C hydroelectric dam in the Peace River Valley, despite intense opposition from many local landowners, the government is promoting a liquefied natural gas (LNG) export industry that could use all of the electricity generated by Site C and still need additional power for the liquefaction process.

The government response to that quandary has been to amend the Clean Energy Act, which stipulates that a maximum of seven per cent of energy generated in the province can be produced by burning natural gas, to allow further natural gas fuelled electricity generation for the purpose of powering LNG operations alone.

That situation has prompted two residents of Charlie Lake, a small community just northwest of the booming natural gas industry town of Fort St. John, to ask serious questions about Site C and why the Province isn’t considering a resource already being produced in their own backyard as the energy source of the future.

“We came to Canada from Germany in 1954,” said one of those men, a retired schoolteacher by the name of Mike Kroecher.

“We live overlooking the Peace River Valley,” he continued. “And we’ve become extremely fond of this area. Of the valley. I’d hate to see it destroyed, which Site C would definitely do.”

The other half of that duo, Rick Koechl, still works as a teacher in Fort St. John.

“I came to the Peace country here in about 1981,” said Koechl. “Lived in Hudson’s Hope – my wife and I did – for about five years.”

After relocating to the Fort St. John area, he quickly began his involvement with issues around the energy sector, particularly the business of natural gas exploration and production, for the same reason as many local landowners: the proximity of industry activities to their homes.

“The Site C issue is one that’s very near and dear to my heart because … it is our backyard,” said Koechl.

Koechl and Kroecher took their concerns to the Peace River Regional District (PRRD) on Thursday, September 20, not simply to complain about Site C in the vain hope that that body could magically cancel the project, but to present a real and possibly viable alternative: natural gas power generation.

As their model, the pair is using a facility known as the Shepard Energy Centre (SEC) that is presently under construction in Calgary, Alberta.

“We expect that we would go commercial with the plant probably early in the first quarter of [2015],” said Gary Payne, vice president of engineering and construction with ENMAX Energy, which is the operator of the plant, adding that performance tests should be complete in November, 2014.

The real significance of those dates for Koechl and Kroecher is that construction just began in July, 2011, meaning that the project will only take about three years to complete, rather than the ten year timeline for Site C.

Koechl and Kroecher count that as the first strike against claims that Site C would be more efficient and more environmentally friendly than a natural gas plant, largely because that construction will require consistent use of vehicles that consume large amounts of fossil fuels. Coupled with the disposal – likely by burning – of 550,000 cubic metres of woody debris resulting from cutting 15,000 to 20,000 acres of boreal forest, that belies the notion that Site C is a clean energy project, according to the duo.

The comparison of Site C and SEC prepared by Koechl and Kroecher makes a strong case for natural gas in other areas as well.

Site C should produce more usable power than SEC –1,035 megawatts for Site C versus 800 megawatts for SEC – but SEC is expected to have a per year energy production of 6,500 gigawatt-hours versus 5,100 gigawatt-hours for Site C, which is the number reported by BC Hydro.

SEC is projected to have an energy efficiency of 92 per cent, compared to just 52 per cent for Site C.

Those differences are particularly concerning for Koechl and Kroecher when they look at the cost of each project. An independent audit put the cost of SEC at $1.3 billion. BC Hydro claims that Site C will cost $7.9 billion.

“There’s no way you could even begin to state that there’s going to be some kind of financial stability in the plan,” Koechl said of Site C. “They don’t seem to have anything but what they claim is an unlimited bank account to build this project. And it’s starting to become ludicrous. Because I think the financial element has been missing.

“We’re trying to bring this into the discussion.”

“We have no idea how accurate the $7.9 billion figure is,” added Kroecher. “The last big public spending project was the convention centre in Vancouver. The initial estimate was $100 million. When it was completed, the figure was close to $700 million. If that applies to Site C, we’ll be looking at a massive cost over-run.

“We don’t know the facts. We are not given the details.”

BC Hydro directed questions on this subject to the Ministry of Energy, Mines and Natural Gas, which takes a very different view on the comparative cost issue.

“It is important to consider the capital cost involved when comparing a natural gas power generating facility and Site C,” said Minister of Energy, Mines and Natural Gas Rich Coleman.

“Most of the lifecycle costs for Site C are upfront capital costs, followed by low operating costs over the long life of the dam. A natural gas plant is the opposite, with most of its costs being fuel costs incurred over the much shorter operating life of the facility.”

Koechl suggests that the long-term costs of natural gas power generation shouldn’t be seen as a negative, but as a positive, since those costs would be associated with operations and maintenance work that would employ British Columbians and purchasing natural gas from a homegrown industry.

“It is important to understand that BC Hydro, in its draft Integrated Resource Plan, considers both Site C and natural gas to be cost-effective resource options,” said another Ministry of Energy, Mines and Natural Gas spokesperson.

“The difference between these costs is risk and uncertainty,” the spokesperson continued. “Site C would be a long-lived asset [that would] provide cost certainty for power customers. The cost of natural gas is subject to market conditions and, as a result, cannot provide the same cost certainty for power production in the long-term.

Koechl suggested that the Province could solve that problem by obtaining natural gas as a royalty-in-kind.

“What this means is the government could take the gas in lieu of the money,” he said. “Why is this good? The gas would always come as a certain quantity. So, if the price goes up, you still take the same amount of gas. It is a hedge against any future inflationary costs.

“That means a facility like the [SEC] would have stable gas prices well into the future.”

“The Province currently does not collect royalties-in-kind, but provincial regulations do provide the Crown with the ability to do so,” said the ministry spokesperson.

The ministry also stated that the number of full-time employees for a hypothetical 500 megawatt natural gas power generation plant would be just 31 people, slightly more than the 25 full-time employees for Site C.

The hydroelectric project is also expected to generate 7,000 person-years of work during construction.

However, Koechl and Kroecher also examine the cost and the economic benefits in terms of what they consider to be waste, suggesting that Site C is an extremely wasteful enterprise. The crux of that argument is the fact that SEC has a footprint on the land of just 60 acres, but Site C could have a footprint of about 25,000 acres.

“The valley will be destroyed. Irreplaceable farmland will be destroyed,” said Kroecher.

“Site C is a feelingless approach,” he continued. “It shows no compassion. I look upon it as the proverbial bull in the China shop. They don’t care how much they destroy provided they get their way. At this day and age, I don’t think we can afford such a massive footprint.”

When it comes to the environmental debate, the Ministry of Energy, Mines and Natural Gas tends to focus on the greenhouse gas (GHG) emissions.

“Studies have found that Site C would produce among the lowest levels of greenhouse gas emissions, per gigawatt hour, when compared to other electricity generation options, outperforming all fossil fuel power generation options,” said Coleman.

Koechl prefers to take a broader view of the issue, noting that LNG is expected to replace the use of coal and bunker oil in Asian nations, as well as in North America, where the SEC is an example of that trend.

“Mostly, it’s geared … to replace the [coal] plants in a time period of between 2015 and 2020,” said Payne. “A lot of the plants in the north are pretty old and they’ll be coming offline. So, that’s the primary [reason].

“But there has been growth,” he continued. “Alberta and Calgary, even in the worldwide recession, they’ve continued to grow.”

Koechl believes that those sorts of developments at home and abroad could help offset the higher emissions from increased natural gas power generation in B.C., an idea that is somewhat supported by the SEC.

“Roughly, the CO2 is less than half,” said Payne, comparing the SEC and coal-fired power plants.

“And then you don’t have the mercury and you don’t have some of the other issues,” he added.

“The greenhouse gas emitted in China is still going to be the same air that we breathe here,” said Koechl. “It’s one atmosphere. And I think that’s the fallacy of this whole project, is the fact that we’re just as happy to ship it in its raw form overseas without realizing that the consequences are going to be right back on our doorstep anyway.

“Here’s the question: do we spend six times more to make a so-called clean energy project work … or do we actually get rational about the financial implications here? We pay the $1.3 billion or thereabouts up front. We burn the gas here. Granted, it’s producing greenhouse gases, but it’s still going into the same atmosphere that’s ultimately going to end up in China.”

It also provides market diversity for a B.C. industry.

“The natural gas is being sourced here, it’s available and it’s being processed here,” said Koechl.

“It could stimulate the main industry we have in this area: gas production,” added Kroecher.

“Nobody has an issue with the fact that probably 90 per cent of our homes in this province are heated with natural gas,” he continued. “Perfectly normal. Nobody argues that point. But when we want to generate some electricity by using natural gas, people say, ‘It’s not clean.’”

“All of this is sort of counterintuitive,” said Koechl.

“Diversification is important to increase the value of B.C.’s natural gas – for the longevity of B.C’s natural gas sector and the benefits it creates,” said Coleman.

However, his attention is directed toward exporting that gas to Asia as LNG, not burning that resource at home.

Ultimately, all of this argument is moot if natural gas power generation isn’t even logistically practical in B.C. All the circumstances seem to be in favour of the SEC being successful, but that may not hold true for a similar project in B.C.

“We own 160 acres and a significant piece of it is a naturally occurring wetland,” said Payne, describing their site in the Shepard Industrial Park, which was formerly agricultural land.

“One of the advantages that we have is, because we’re near a municipality and a large city, our transmission line losses are minimal,” Payne continued, noting that that has been a significant problem with the coal plants farther north.

Payne suggested that transmission line loss could also be an issue with Site C for the same reason.

“The main transmission lines for us are right across the road from us,” he said. “Like less than 100 metres. That’s the transmission corridor.”

The SEC also has access to reclaimed water.

“It’s not uncommon anymore,” said Payne, adding that it has been a standard practice for two decades.

“It’s water that comes out of the wastewater treatment plants here in Calgary that would be discharged into the [river],” he continued. “And we’re just making one more use of it before it does that.

“They say it’s swimming pool quality water, but we can’t get anybody to swim in it.”

The Ministry of Energy, Mines and Natural Gas suggests that everything that has gone well for the SEC are elements that could be problematic for similar projects in B.C.

“Constructing a facility the size of … Shephard Energy Centre in British Columbia would pose logistical challenges,” said the ministry spokesperson. “Generally speaking, it is preferable to build a power system site close to transmission, pipelines and a demand centre.”

Satisfying those elements could prove difficult because the natural gas supply is in the relatively unpopulated northeast corner, far from the major demand centres.

However, the same is true of Site C.

Regardless, there are other limiting factors as well, according to the ministry. First of all, it is preferable to build a natural gas power plant near sea level for the sake of combustion efficiency. Secondly, certain air sheds may not be able to handle the increased emissions because of wind patterns and temperature inversions that can cause an air mass to linger over a fixed geographical area.

Land zoning and site access are also issues, as well as the ability to obtain and discharge water used for cooling the facility.

Still, there are already five natural gas power generation stations in B.C. The plants located in Belcarra, Prince Rupert and Fort Nelson are owned by BC Hydro, while BC Hydro has a 20-year purchase agreement with the facility owned and operated by Capital Power Corporation in Campbell River.

The remaining plant is the cogeneration facility at Spectra Energy’s McMahon natural gas processing plant in Taylor.

Republished from Pipeline News North:

Kitimat Wants Answers on Proposed Projects’ Power Sources

27 Nov

Kamil Karamali – November, 21, 2012

Kitimat council has a lot of questions on power sources for proposed projects in the area, so it’s asking the province.

Councillor Phil Germuth put forward a motion at Kitimat council Monday night to send the province and BC Hydro letters. asking for details on where the proposed LNG projects and Enbridge’s Northern Gateway tanker port plan to get their power from and if it will be at the cost of rate payers.

“According to the calculations, BC ratepayers could be subsidizing  the private interest of the Enbridge proposal by at least 50-70 million  dollars per year. Of course the LNG’s use much more power than the Enbridge project will”

Council will also ask BC Hydro to attend a public meeting to discuss the issue in Kitimat.

Earlier this month, Germuth told council he was mystified as to why BC Hydro was pushing to upgrade its transmission line to Kitimat when no LNG projects are yet guaranteed to proceed.

BC Energy Minister Rich Coleman told the Globe and Mail newspaper last week that the BC government is expecting LNG proponents to let the province know within two months whether they will need electricity from the hydro grid to power their projects or whether they intend to generate their own electricity by burning natural gas.

Last month, the government gave B-C Hydro an extra eight months to draw up a long-awaited 20-year plan for meeting the province’s electricity needs.

Republished from

B.C., Yukon natives ramp up opposition to oil development

27 Nov

MARK HUME, November 27, 2012

VANCOUVER — The Globe and Mail

A massive gas play in Canada’s northwest corner is sparking increased conflict with aboriginal groups in British Columbia and Yukon.

The Unist’ot’en, one of five tribal clans of the Wet’suwet’en, was planning to hold a series of protest rallies Tuesday to draw attention to a blockade the group has established on a road near Houston, B.C., about 400 kilometres east of Prince Rupert.

Meanwhile, in Yukon, leaders of the Kaska Dena announced Monday that they will hold off on any action until they’ve had a face-to-face meeting with Premier Darrell Pasloski, Dec. 7, in an attempt to head off growing conflict over oil and gas development.

“This will be a very important meeting. It will either set us on an agreed upon path forward, which will benefit industry and all Yukoners, or force us to seek alternative ways of ensuring our rights and our lands are protected,” said Chief Liard McMillan, a representative of the Kaska Dena.

In B.C., where tensions have been heightened by the proposed Enbridge Gateway oil pipeline, and the extensive gas development taking place in the northeast sector of the province, Freda Huson of the Unist’ot’en said her group has built a protest camp directly on the right-of-way for Apache Canada Ltd.’s Pacific Trails Pipeline.

Ms. Huson said the group has also set up a blockade on the only road into the area, about 60 kilometres south of Houston, and members are stopping all resource industry traffic.

“There’s only one way across our territory and that’s a bridge that we have blocked off,” she said Monday. “We ask [anyone trying to drive through] who they are, what are they doing there, how long do they plan to stay and what it is they are doing and if it is going to benefit our clan. And we ask too if they are with government or industry that is destroying our land. That’s the final question. If they can’t qualify by answering all those questions, they won’t be permitted through.”

Ms. Huson said traffic is light at this time of year because the road is mostly snowed in, but the Unist’ot’en turned away an Apache Canada survey crew last week.

Company spokesman Paul Wyke said the Unist’ot’en “have expressed some concerns” about the Pacific Trails Pipeline (PTP) project.

But he said most native organizations along the route are supportive of the project and the company is hoping any outstanding issues can be resolved.

“PTP continues to consult with first nations along the pipeline right-of-way,” he said in an e-mail. “We understand the Unist’ot’en have now said they want to open up lines of communication and, as we have always maintained, we are willing to meet with them to discuss their concerns.”

Apache Canada is proposing to build a 463-kilometre pipeline, at a cost of $1-billion, to link its gas fields in northeastern B.C., with a new liquefied natural gas export facility planned for Kitimat.

But Ms. Huson said her group is steadfastly opposed to the pipeline because it would pass through the only two areas in Unist’ot’en territory that have not yet been disturbed by resource development.

“We’ve made the decision we are standing up to stop the destruction of [that land] because otherwise there will be nothing left for our future generations,” she said.

Chief McMillan said the Kaska Dena are very much aware of the speed with which oil and gas development has been taking place in northern B.C., and are concerned the same thing could happen in Yukon, where industry has identified massive gas reserves, particularly in the southeast.

“We didn’t realize the significance of it until we started to see what was happening just immediately across the border with companies like Apache, making major shale gas discoveries in the northeastern part of British Columbia,” he said.

Chief McMillan said Yukon tribes are alarmed about a proposed legislative amendment that would mean oil and gas development could take place in traditional territories without the consent of first nations.

Yukon government officials were not available to comment Monday, but a spokesperson for the Premier confirmed a meeting will take place with the Kaska Dena next week.

Republished from

Apache considering North American pricing for Kitimat LNG executives tell Miami conference

27 Nov

By Robin Rowland – November 16, 2012

Apache is considering selling liquified natural gas shipped to Asia from Kitimat at North American prices, a industry-watching news site reports from an energy conference in Miami.

Argus Media says that Apache and its partners in KM LNG, EOG and Encana are still finding little interest in the original idea of selling the LNG at  the Asian base price, called Japan Cleared Customs price, which is a percentage of the price of oil.  The idea at that time was that profit would come from the difference between North American market price and the higher Asian price.


That was undercut when another group, Cheniere Energy, decided to sell natural gas to Asia from  its Sabine Pass export terminal in Louisiana based on the “Henry Hub”  North American market price for natural gas,  plus a 15 per cent surcharge and a reservation fee.

Argus says  Encana’s president for US operations Jeff Wojahn told investors at a Bank of America Merrill Lynch Global Energy Conference in Miami  that the Kitimat developers are now considering “options typical for the Gulf coast export projects.”

Argus also quotes  Apache manager of investor relations Castlen Kennedy as saying: ““Kitimat is progressing and we will announce a final investment decision (FID) soon. The local government is very supportive of us.”

Argus quotes Encana’s Wojahn as saying the FIB will come in the first quarter of 2013, using their own natural gas supplies. “All three of the partners have assets in the Horn River so it’s a natural area of development for the play. And the Horn River basin is a world-class shale gas basin, it’s waiting for an LNG pump, so it’s really positioned well.”

Republished from Northwest Coast Energy News:

Natural gas: Asia beckons as promising market for LNG

26 Nov

By Michael Kavanagh, November 19, 2012

As the US shale gas glut undermines demand for Canada’s natural gas, can output from above the 49th parallel find a market by going west to Asia?

Several projects are proposed for exporting liquefied natural gas (LNG) from terminals on the northern coast of British Columbia, to establish Canada as a leading provider to energy-hungry Asian economies

The task of finding new export markets for Canada, the world’s third-largest producer of natural gas, is particularly pressing now that its dominant customer – the US – is awash with it.Joe Oliver, Canada’s minister of natural resources, accepts that the country must look west across the Pacific rather than to the south and east to profitably extend the exploitation of its gas reserves – assuming the tricky problem of extraction and preparation for transocean transportation can be solved.

In recent weeks the minister has made courtesy calls to government and industry leaders in Japan, South Korea and India.

Included in his itinerary was a meeting in September with Yukio Edano, the Japanese trade minister, to gauge Japanese interest in purchasing liquefied natural gas from Canada’s west coast – an appetite that was sharpened by last year’s Fukushima nuclear power plant disaster, which has heightened Japan’s reliance on imported gas.

Mr Oliver’s aim has been to convince Asian economies, including China, that Canada is serious in its early-stage ambitions to compete against rival suppliers in the global LNG market.

But to deliver on the potential of booming international demand requires Canada to secure tens of billions of dollars of investment in the infrastructure required to move large quantities of LNG out west via pipelines to processing terminals on the coast of British Columbia.

Mr Oliver said in Tokyo in September that Canada had plans to liquefy and export 9bn cubic feet a day of gas if demanded, stating: “We are poised to become a major new safe, reliable and cost-effective LNG supplier to Japan, Korea and other Asia-Pacific nations for years to come.”

However, before the trip to Japan, he conceded that Canada still needed to convince potential investors and customers that unnecessary delays to planning consents could be avoided.

Securing domestic support for the development of LNG appears to be an easier task than for schemes aimed at piping bitumen-rich sand oils for export across large swaths of Canada, which have roused environmental protest.

Two months ago the government of British Columbia reached a further agreement with the Haisla First Nation native tribe that allows more coastal land to be opened up for LNG export projects from Kitimat on the Pacific Coast.

LNG Canada – comprising Royal Dutch Shell, Korea Gas Corporation, Mitsubishi and PetroChina – is among consortiums that are proposing terminals around the Kitimat area of British Columbia, which would make the Pacific coast inlet a new global LNG hub. The Shell-led project has been costed at $12bn.

The Apache Corporation, based in Houston, is backing Kitimat LNG, another consortium seeking partners in the development of another terminal in the area costed at a more modest $4.5bn. Apache expects to make a final decision on development early next year, with earliest production expected in 2017.

Further northwest along the coast, near the southern tip of Canada’s border with Alaska, BG Group is also proposing the development of an LNG terminal at Prince Rupert, capable of drawing off up to 4.2bn cu ft per day of natural gas from fields in northeastern British Columbia and neighbouring Alberta.

But if few doubt Canada’s potential as a source of natural gas for Asia’s booming economies, questions are being raised as to whether all Canada’s slated LNG projects will proceed.

Scepticism on specific projects mirrors wider concerns over whether the country will come too late to the race to bring LNG to Asian markets to outscore rivals, such as Mozambique and Australia, in securing development backing.

According to a report released by the energy industry consultancy Wood Mackenzie this month, competition from US shale gas has resulted in western Canada gas exports slipping by 4bn cu ft a day in the past five years. This, combined with reduced gas prices, has seen annual gross revenue from the region’s gas exports fall by some US$26bn – or 80 per cent – since 2008.

Yet some fields could be developed at break-even costs as low as US$2.40 per million British thermal units (mBtu).

The main problem facing Canada’s push to beat others – including the US itself – in becoming a leading gas exporter is the cost of infrastructure rather than producing the gas itself.

Even so, according to Asish Mohanty, analyst for Wood Mackenzie: “A well-managed western Canadian LNG export development could achieve costs of delivery into Asian markets similar to those from major competing options.”

An aggressive approach by federal authorities could also favour Canada’s ambitions if competitors lose their way.

“A combination of prolonged high-cost environment in Australia, east African delays and US regulatory uncertainty could pass the impetus to Canada,” concludes the consultancy’s report.

Republished from