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TransCanada Suspends Nova Gas Transmission Addition Due to Kitimat LNG Delay

Work has been suspended on a C$1.9 billion ($1.4 billion) planned British Columbia (BC) addition to TransCanada Corp.’s western supply collection network, Nova Gas Transmission Ltd. (NGTL) until shippers set a schedule for the long-proposed liquefied natural gas (LNG) export project in Kitimat.

The proposed North Merrick Mainline will stay in limbo until its shippers, Chevron Canada Ltd. and Woodside Energy International Ltd., set a schedule for Kitimat LNG, NGTL told the National Energy Board (NEB).

The Merrick “construction and in-service schedules are closely coordinated with the Kitimat LNG facility development,” the NEB filing said.

“In late 2015, the Kitimat LNG partners advised NGTL that they [were] re-phasing the pace of Kitimat LNG facility development,” the filing said (see Daily GPI, Nov. 16, 2015). “The LNG partners have not yet taken a final investment decision on the LNG development.”

The Merrick plan was struck in June 2014 in a preliminary stage of Canadian regulatory procedure known as “project description,” an outline form that enables an early start on formal community, environmental and aboriginal consultation.

The complete “facilities application is unlikely to be filed in 2016,” the NGTL filing said. “Stakeholder and community engagement, Indigenous relations activities, and field studies have been temporarily suspended until the re-phasing schedule is determined.”

The Kitimat LNG project, also known as KM LNG, will be 12 years old this year. Named after its seaport location, the project was the first in the long current lineup to build LNG installations on the northern Pacific Coast.

KM started as an import terminal proposal in 2004 but was converted into an export scheme in 2009 as horizontal drilling and hydraulic fracturing spread, flooding gas markets and gutting prices across North America with new shale supplies.

While seeking elusive overseas sales, the project also had numerous ownership changes. The current structure emerged last April when Australia-based Woodside bought a half-share from Apache Corp. for US$854 million (see Daily GPI, Dec. 15, 2014).

The KM package includes 1,000 square miles (2,600 square kilometers) of drilling rights in the farthest north BC shale formations, Horn River and Liard, plus a 480-kilometer (280-mile) proposed gas express route to Kitimat called Pacific Trail Pipeline.

NGTL designed the Merrick line as a 260-kilometer (156-mile) installation of jumbo pipe up to 48 inches in diameter to relay Horn River and Liard shale gas south to the north-central BC start of the westbound Pacific Trail conduit.

Chevron and Woodside hold contracts for up to 1.9 Bcf/d of delivery capacity, or about four-fifths of potential Merrick capacity and all of KM’s planned maximum tanker cargoes. The Kitimat project has held a long-term NEB gas export license to hunt for overseas customers since 2011.

Chevron put its BC plan on hold last year as global corporate revenues were pinched by falling oil prices, the linked contract price of Asian liquefied gas, and rising construction costs of two mammoth Australian LNG export developments (see Daily GPI, Jan. 30, 2015).

Work continues on other northern Pacific projects by sponsors that are less squeezed by current energy price lows and tap BC’s Montney formation, which is more accessible and richer in liquid byproducts than KM’s Horn River and Liard properties.

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