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ExxonMobil, Imperial Assessing BC LNG

ExxonMobil Corp. and Imperial Oil Ltd. are in the "very early stages" of planning a business to export liquefied natural gas (LNG) from British Columbia's west coast, Imperial CEO Bruce March said last week.

ExxonMobil, which is Imperial's majority owner (69.7%), is in no rush to build a facility, March told an audience at an investment conference organized by the Canadian Association of Petroleum Producers. However, a strategy is taking shape to underpin any project that might move forward, he told the audience.

More than four years ago the oil major and Imperial jointly acquired 115,000 net acres in the natural gas-rich Horn River Basin of BC (see NGI, May 5, 2008). A year later ExxonMobil acknowledged that it had accumulated more than 300,000 net acres in the play and earlier this year its leasehold was estimated at about 340,000 net acres.

ExxonMobil opened its wallet again in October, a deal that Imperial joined in November, offering $3.14 billion to buy Calgary's Celtic Exploration Ltd. (see NGI, Oct. 22). Celtic is giving the partners 545,000 net acres in BC's gassy Montney Shale, 104 net acres in the Duvernay Shale, as well as other lands in Alberta. The Celtic purchase, once complete, would provide more leverage to build a viable LNG export project, March told the audience.

"Celtic has done a wonderful job of acquiring those leases and putting together production," said March. Celtic's output in October averaged around 72 MMcf/d of natural gas and 4,000 b/d of crude, condensate and natural gas liquids (NGL). At the end of 2011 the properties included 128 million boe of proved plus probable reserves, of which 76% were natural gas and 24% are crude, condensate and NGLs.

"We are anxious to scale up operations [and] develop resources faster," said the Imperial chief. "We are in the very early stages of looking at LNG off the BC coast and Celtic reserves would be underpinning a potential LNG strategy."

Still to be completed are costs and preliminary designs. The producers are "looking at what is available." Western Canada presents some "built-in challenges," March said. "At this stage, we are working through all these."

The No. 1 natural gas producer in North America has been looking at all of its options, ExxonMobil investor relations chief David Rosenthal said earlier this year (see Daily GPI, April 27). Given the company's "competitive advantages" in North America, "it won't come as any surprise to learn that we are studying and assessing proposals" that included LNG export plans. "What others are doing, we are doing."

ExxonMobil and Imperial will have to elbow their way into the BC export line (see NGI, Feb. 13). Leading the pack is a consortium led by Shell Canada Ltd., which last summer asked the National Energy Board (NEB) for approval to build the biggest North American LNG export facility to date near Kitimat, BC capable of exporting beginning in 2019 up to 24 million metric tons/year, or 3.4 Bcf/d, which would be 25% of Canada's entire gas production in 2011 (see NGI, Aug. 6).

NEB already has given the green light to two LNG export facilities that would be built in the Kitimat region: BC LNG Export Co-operative Ltd., also known as the Douglas Channel Energy Partnership, as well as KM LNG, a partnership between affiliates of Apache Corp., EOG Resources Inc. and Encana Corp.

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