Apache Canada lacks ‘credibility’ in LNG market

29 Nov

From Alberta Oil Magazine

http://www.albertaoilmagazine.com/tag/kitimat-lng/

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.’”

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