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CNOOC-Nexen Option Site for BC LNG Export Terminal

China National Offshore Oil Co. (CNOOC), through Canadian subsidiary Nexen Energy, has been awarded a site for its proposed liquefied natural gas (LNG) export terminal on the northern Pacific coast of British Columbia (BC), the provincial government said Wednesday.

The agreement is akin to a commercial option on privately owned real estate but is in a region that is virtually all Crown or public property. The deal grants CNOOC-Nexen “exclusive” access to part of a government-owned spread near Prince Rupert called Grassy Point. CNOOC-Nexen agreed to pay the BC government C$24 million for the Grassy Point site, if and when the project proceeds into construction.

CNOOC acquired Calgary-based Nexen in late 2012 (see Daily GPI, Dec. 11, 2012).

While resolving the question of a potential location for the CNOOC-Nexen proposal, the arrangement by no means lessens competition among 10 declared contenders to build Pacific coast LNG export terminals in what has become known in BC as “the race to Asia.”

In announcing the deal with CNOOC-Nexen, BC Premier Christy Clark added that discussions continue with three other projects seeking locations in the Grassy Point region. Sponsors of four projects stepped forward when the provincial government last winter issued a call for expressions of interest in the area.

At the same time, four other would-be LNG exporters are developing projects at alternative Pacific coast sites south of Prince Rupert at Kitimat. Another two projects are in earlier planning stages and have not yet selected a location.

Clark described the agreement with CNOOC-Nexen as one step among many toward developing an LNG export industry, considered a pillar of her Liberal government’s successful re-election platform last spring.

Clark’s administration has set its sights on having at least two or three export terminals -- and possibly as many as five -- up and running within a decade. While the project sponsors are obtaining gas export licenses from the National Energy Board (NEB), none have announced Asian sales contracts or begun construction. Several are working on pre-construction, however.

“Building an LNG export industry is an unprecedented opportunity to create thousands of jobs while supplying Asian markets with the world's cleanest burning fossil fuel,” said BC Natural Gas Development Minister Rich Coleman. “Natural gas is redefining the economic prospects of British Columbians, and our government will ensure these benefits are enjoyed for generations to come.”

Nexen president Kevin Reinhart said the partnership has “a long process ahead that includes a site viability review, a comprehensive environmental impact assessment and stakeholder consultation."

Reinhart set no date for finishing the process and building an export terminal. He repeated a promise being made throughout the industry and by the BC government: “Through project assessment and stakeholder consultation we are committed to examining the potential to build a best-in-class LNG facility -- one that creates jobs, delivers lasting economic and social benefits and is developed with the environment top-of-mind.”

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