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Kitimat LNG Inks Third Deal to Export Canadian Gas

July 13, 2009
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Signing its second agreement in just over a month, Kitimat LNG Inc. and energy multinational Gas Natural have reached a deal under which Gas Natural intends to acquire up to 30% of production from Kitimat LNG's proposed liquefied natural gas (LNG) export terminal in Bish Cove, BC. The deal also provides Gas Natural with an option to purchase an equity stake in the Kitimat LNG terminal.

Gas Natural, which supplies, distributes and sells natural gas in Spain, Latin America, Italy and France, is the world's second largest LNG operator through Stream, its 50% joint venture with Repsol. Under the deal with Kitimat LNG, Gas Natural plans to purchase up to 1.6 million tons per annum (mtpa) of LNG from the terminal for 20 years. In addition to its leading presence in the Atlantic and Mediterranean LNG markets, Gas Natural could acquire a strategic position in the Pacific basin.

"This is a very exciting time for Kitimat LNG," said Rosemary Boulton, president of Kitimat LNG. "With the Gas Natural agreement and our MOUs [memorandums of understanding] with other LNG leaders such as Korea Gas Corporation (KOGAS), Kitimat LNG is in a strong position to obtain further interest in our terminal and move our project forward."

A Gas Natural official added, "Gas Natural's agreement with Kitimat LNG is a further step in the group's strategy of LNG supply diversification. Gas Natural's LNG portfolio already provides volumes from North and West Africa, South America and [the] Middle East."

In early June Kitimat LNG entered into a more than $20 billion agreement with KOGAS, under which KOGAS will acquire up to 40% of Kitimat LNG's production and an option to acquire an equity stake in the terminal (see NGI, June 8). KOGAS plans to purchase 2 mtpa. In January Japan's Mitsubishi Corp. agreed to acquire 1.5 mtpa of terminal capacity and acquire a minority equity interest in the terminal.

All told, the facility with a 5 mtpa sendout capacity would appear to be fully subscribed when it opens in 2013 because the three public MOUs equate to 5.1 mtpa. Ilene Schmaltz, Kitimat LNG's vice president of Supply Marketing, cleared up the discrepancy, noting that some MOUs call for purchases up to a certain amount of LNG.

"We are confident that the MOUs that we have signed so far will lead to very significant, long-term production agreements, but they will not exceed our production capacity," she told NGI.

Last September Kitimat LNG cited shifting global gas supply and demand fundamentals as the reason to revise its plans for a LNG import terminal in favor of an export terminal at Bish Cove (see NGI, Sept. 29, 2008). Rising gas demand in Asia and recent increases in supply in North America -- including in the U.S., Canada's traditional export market -- have led to significantly higher natural gas prices in Asia than in North America. The terminal will receive natural gas via pipeline from Western Canada.

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