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Anadarko Newest Player to Enter North American LNG Market

Anadarko Newest Player to Enter North American LNG Market

Anadarko Petroleum Corp. muscled its way into the liquefied natural gas (LNG) market Thursday with the purchase of Access Northeast Energy Inc. (ANEI), a private Canadian company whose sole project is a proposed LNG receiving terminal on the coast of Nova Scotia. Just days ago, ANEI secured the critically needed environmental approval for a planned 1 Bcf/d facility, and all of the remaining approvals are expected by year's end.

ANEI, which is headquartered in Halifax, NS, wants to build the terminal at Bear Head, Point Tupper on Cape Breton Island, along the Strait of Canso. The area is already zoned as industrial with a deepwater port, and ANEI gained environmental approval this week (see Daily GPI, Aug. 12). Commercial operations could begin by late 2007.

"This project can provide Anadarko a competitive advantage in international natural gas development," said Bob Daniels, Anadarko senior vice president of exploration and production. "We have gained a potentially low-cost, low-risk entry into the LNG business, one of the fastest-growing segments of our industry.

"Anadarko is actively exploring and producing oil in Algeria and Qatar, two of the world's top LNG exporting countries. We are making a concerted effort to extend our gas exploration in those countries, as well as in other producing regions. Participating in the commercialization of international natural gas resources is becoming more necessary in the upstream industry and is consistent with Anadarko's growth strategy going forward," he said.

Anadarko would use the planned Bear Head terminal as a foothold, said Daniels, and partner with "other major entities such as national oil companies to facilitate the broader value chain of investment, with the primary purpose of using regasification as a leveraging vehicle into new upstream natural gas opportunities and profitability."

Anadarko's focus, he said, "remains on the front and back ends of the value chain, and we will look to partners to provide capital and expertise particularly in the midstream segments. Our interest in developing the Bear Head terminal is to allow us to do what we do well -- explore for, develop and market valuable energy resources."

Teresa Wong, manager of public affairs, said Anadarko's LNG partners could be one of many among its international partnerships. "We have long established relationships with Sonatrach and Qatar Petroleum, both of whom would like to serve gas markets in the premier Northeast U.S.," she said. "We have been talking with both countries, and others for some time. We expect this announcement will differentiate Anadarko and provide us a competitive advantage in the international gas business."

Qatar Petroleum is already involved in a joint venture with ExxonMobil RasGas Inc. has signed a supply agreement with FPL Group Resources LLC for a proposed LNG and regasification terminal on Grand Bahamas Island and a pipeline to Florida (see Daily GPI, July 28). Sonatrach is the national oil company of Algeria and is structured as a holding company with five major operating subsidiaries: exploration, production and marketing of oil; gas and chemicals management; transport, including pipeline operation and maintenance; LNG and liquefied petroleum gas plants; and international operations, including management of foreign investments and overseas sales offices.

"We are looking at a number of options to partner with either of those national oil companies, and/or partnering with a major oil company," Wong said. "Those partnerships could cover the whole value chain of the investment. We do not expect to complete the regas facilities alone, but we do not have a timetable for when something on the partners will be announced."

Anadarko is not disclosing financial details of the Access Northeast Energy transaction. The planned Bear Head terminal is expected to cost $400 million.

For Anadarko, the planned facility holds several advantages for delivering natural gas to North America's eastern seaboard. Because it is situated in an industrial zone, the project enjoys a supportive relationship with the provincial government and surrounding community. The Strait of Canso is a sheltered, ice-free, deepwater port, and relative to other North American importation points, Nova Scotia is a short shipping distance from some of the world's largest existing and planned LNG supply regions. The project also has access to growing gas markets via the nearby Maritimes & Northeast Pipeline.

"The local community and all levels of government have been exceptional supporters throughout this project and we applaud their efforts to create viable industries in the province that in turn will provide local jobs, economic benefits and a vital energy source for consumers," said Mike Bridges, Anadarko Canada Corp. president. "We look forward to working with all stakeholders to fully develop this opportunity."

The purchase comes at a critical time for Anadarko, which has been struggling to build gas reserves in North America. Richard J. Sharples, Anadarko's senior vice president for strategic planning and marketing, testified about dwindling U.S. gas supplies before a hearing of the Senate Energy and Natural Resources Committee. He said then that U.S. LNG demand was growing (see Daily GPI, March 5).

The Houston-based producer has a big presence in Canada already. Operations are spread through Alberta, British Columbia, Saskatchewan and the Northwest Territories, and the company's Canadian arm employs about 700. In 2003, Canadian production accounted for 16% of Anadarko Petroleum's total production volumes.

In 2003, Anadarko's Canadian daily production averaged 383 MMcf/d of gas and 19,000 bbl/d of oil, condensate and natural gas liquids. It has five million net acres currently under lease throughout the country with more than 3,400 net producing wells. This year, Anadarko Canada plans to drill about 175 development and 40 exploration wells.

In 2003, areas of activity included: Saddle Hills, where Anadarko drilled a natural gas discovery in the first quarter; the Slave Point trend of northeast British Columbia, where eight discoveries were made in 2002; the Wild River area of the Deep Basin in Alberta; and several tight-gas plays in the Western Canadian Sedimentary Basin.

With the addition of Anadarko, there are now at least 25 companies working on projects to bring LNG to North American markets. They include ExxonMobil Corp., BHP Billiton, ChevronTexaco Corp., Mitsubishi, Occidental Petroleum, Tractebel LNG, AES Corp., Royal Dutch/Shell Group, ConocoPhillips, Marathon Oil, Sempra Energy, Cheniere Energy Inc., Freeport-McMoRan, El Paso Corp., Excelerate Energy LLC, TransCanada, Gaz Metro Ltd., Gaz de France, Amerada Hess, KeySpan, BG Group, Irving Oil, Crystal Energy, Poten & Partners and Enbridge.

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