The Canadian natural gas industry has sailed into overseas markets for the first time with propane shipped from an export terminal erected on the Pacific coast of British Columbia (BC) at Prince Rupert by Calgary-based AltaGas Ltd.
“This is just the beginning,” President Randy Crawford said at a TD Securities investment conference. He confirmed that jumbo tankers have begun overseas voyages from the northern storage and loading site.
The firm’s Ridley Island Propane Export Terminal (RIPET) began deliveries to Asia at a rate of 40,000 b/d, Crawford said. AltaGas and Dutch storage tank conglomerate Royal Vopak, which has a 30% stake in the project, designed the C$500 million ($375 million) RIPET with built-in capacity to double the initial traffic to 80,000 b/d for little cost, he added.
While Japanese importer and distributor Astomos Energy Corp. has a contract to take one-half of RIPET’s annual output, Crawford said the Canadian product is also in demand in other big Asia-Pacific destinations such as India and China.
“These countries are growing their middle classes and energy demand. They covet what we take for granted,” Crawford said.
As an environmental replacement for primitive heating and cooking fuels that emit carbon clouds such as wood and dried livestock dung, “this is an opportunity of a lifetime,” he noted.
The Canadian propane travels overseas in mammoth very large gas carriers, or VLGCs, that hold cargo of 600,000 bbl or more in hulls up to 850 feet long. The initial RIPET traffic fills two VLGCs per month. The ships are exempt from a Canadian ban against loading oil tankers on the BC coast north of Vancouver Island.
RIPET also avoids pipeline holdups by environmental, native and political opponents of fossil fuels because propane reaches the terminal via a northwestern leg in the Canadian National Railway.
At the late spring official opening of RIPET, BC Premier John Horgan and federal Natural Resources Minister Amarjeet Sohi praised the project as a founding venture for a new generation of energy wealth and employment.
Results of the new overseas gas-byproduct sales will start to show up as performance improvements on 2019 quarterly financial statements of the terminal’s suppliers, Crawford said.
AltaGas estimates the netback, or gas-producer price received for overseas propane sales, is US$21.85/bbl after terminal and transport costs of $17.60. The Asian deliveries pay a $5.25 or 32% premium over the $16.60 producer netback on the crowded Canadian propane market in Alberta.
The premium is partly owed to a Canadian geographical advantage over propane from the United States. RIPET boasts a 10-day VLGC sailing time to Japan, less than half the 25-day voyage from the Mont Belvieu natural gas liquids (NGL) terminal in Texas.
For production firms, RIPET provides an outlet for growing output from liquids-rich sweet spots in the Montney Shale gas formation that straddles northern BC and Alberta.
As in the United States, Canadian liquid byproducts drive unconventional drilling by compensating for soft natural gas prices. Favorite Montney targets routinely yield up to 250 bbl for every 1 MMcf of raw gas flows.
The TD Securities investment conference featured accounts of a rising Montney NGL tide from among others, Encana Corp., Advantage Oil & Gas, Kelt Exploration, NuVista Energy, Birchcliff Energy, Tourmaline Oil, Seven Generations Energy, Paramount Resources, ARC Resources, Crew Energy, Hammerhead Resources and Painted Pony Energy.
The NGL tide also lifts midstream specialty companies in fossil fuel processing, transportation and storage. Multiple expansion opportunities will crop up over the next 10-15 years, said Keyera Corp. President David Smith.