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NGTL Forecasting Growing Canadian LNG Exports

Canadian efforts to break into the global liquefied natural gas (LNG) trade still have a chance to make a late but strong start, according to the pipeline partner in the stalled export campaign.

LNG exports are projected to begin in 2027 from the northern Pacific coast of British Columbia (BC) in a new forecast by TransCanada Corp.’s western supply collection network, Nova Gas Transmission Ltd. (NGTL).

The outlook foresees new ocean terminal facilities making a start on loading tankers with 700 MMcf/d. The anticipated export traffic grows to 2.2 Bcf/d in 2030 then achieves 3.4 Bcf/d in 2032.

NGTL does not identify its choice of LNG project most likely to succeed. But a name stands out in TransCanada’s pipeline project portfolio: the LNG Canada group led by Royal Dutch Shell plc, which is partnered with Korea Gas Corp., Petrochina and Mitsubishi Corp.

LNG Canada is the anchor customer for TransCanada’s proposed Coastal GasLink, a C$4 billion ($3.2 billion) conduit that would move up to 5 Bcf/d over a 390-mile stretch from inland shale production fields to the northern BC seaport at Kitimat.

The group this fall obtained a five-year reprieve until 2027 from a 2022 deadline for starting shipments in its original National Energy Board (NEB) export license. Shell has set a target – but not a deadline – of 2018 for a construction decision on a Kitimat terminal. Building the LNG supply network is forecast to take five years.

NGTL’s optimistic projection stops short of making promises. “LNG exports from Canada remain a potential future market,” said the new forecast. “However, the timing and quantity of such volumes remain uncertain.”

TransCanada’s supply collection grid is sure that failed LNG projects, ditched by other international groups, left a production legacy. Gas is forecast to flow to North American markets from shale drilling rights that the groups acquired as part of their foiled overseas export plans, via the cross-continent TransCanada network.

The new forecast accompanies a request for the NEB to allow conversion of a northern BC project originally approved as an LNG supply conduit, the North Montney Mainline, into an NGTL network extension.

The foiled Asian sponsors of LNG exports remain heavily committed in BC, with interests in developing gas production to recover investments and losses measured in hundreds of millions of dollars.

NGTL pointed out the biggest subscriber to the Montney line’s capacity is still the original customer, the Progress Energy group, led by Malaysia’s state-owned Petronas, which cancelled the mammoth Pacific NorthWest LNG project this summer.

The Progress team is in deeper than even the C$600 million ($480 million) in compensation for wasted project development costs that it already paid to TransCanada, NGTL disclosed.  The penalty arose from cancellation of the supporting cross-BC pipeline project that the Montney supply collector line was intended to fill, Prince Rupert Gas Transmission.

An additional penalty of more than C$350 million ($280 million) would be owed if the Montney project is also scrapped, NGTL said in its supply forecast filing at the NEB.

Investments that the Progress group made in developing BC shale gas, during years of planning the Pacific NorthWest LNG export network, dwarf the penalties for pipeline project terminations, NGTL added.

“Given the significant termination cost and the fact that Progress and its partners have already spent over C$5 billion [$4 billion] developing their North Montney land position, NGTL does not expect that a Progress decision to terminate its service would be taken lightly,” said the NEB filing.

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