Encana Corp.'s management team is "very interested in the expansion and the creation" of a liquefied natural gas (LNG) export market from North America and would support the efforts of new joint venture (JV) partner PetroChina International Ltd. to make it happen, CEO Randy Eresman said Thursday.
A subsidiary of PetroChina late Wednesday inked a $5.4 billion cooperation agreement to partner 50-50 in Encana's Cutbank Ridge assets, which straddle the British Columbia and Alberta boundary (see Daily GPI, Feb. 10). The transaction still requires various approvals and won't be finalized for months, but down the road, Eresman said possibilities exist beyond developing unconventional resources.
During a conference call with financial analysts Thursday the CEO was asked about the long-term plan for the JV. For a period of up to five years the agreement gives Encana operational and marketing control of the production. However, when PetroChina takes over some of the operations and marketing, are LNG exports a possibility?
"It wasn't part of our discussions at all, although I fully understand and appreciate the desire for PetroChina to link up with LNG in North America," Eresman said. The current agreement with the Chinese energy company calls for Encana to market the JV produced gas "for up to the first five years, and then after that period of time, PetroChina would be responsible for its own...We fully expect that they will advance their capability much sooner than that.
"In the longer term, they have expressed a desire to be involved in the North American LNG market, but we have not discussed any details of that at this point in time. We are, of course, very interested in the expansion and the creation of an LNG export market from North America. We do think it makes a tremendous amount of sense for that market to be linked to the Asian market from a proximity point of view. And so we look forward to supporting that in any way we can."
LNG exports would be "an interesting additional component to the deal," Eresman said of the PetroChina JV. "We've talked about the need for export LNG capacity in North America since the recognition of the abundance of natural gas in North America and the acknowledgment that we have multiple points of import for LNG, but no real export points for LNG.
"And to make the market more fluid and functional, we think it needs both...We think there is now a capacity from the resources that exist in North America to have a substantial amount of LNG on the continent. And more specifically, we think there's an opportunity with Asian players who demand more natural gas in their energy portfolios."
Asked how far into the future he thought exporting LNG could come about, Eresman said, "Realistically...you've got to be looking at five-year sort of time frames for the first [exports], 10 to 20 years out, we guess, if you'd like to have a significant quantity [from] North America."
Already on the drawing board is the proposed Kitimat LNG facility, which would export gas from Western Canada to Asian markets (see Daily GPI, Feb. 8; Dec. 27, 2010). However, Encana hasn't been in "specific discussions" about the proposed facility at this point, said the CEO.
"We're looking at LNG across North America, so of course we'd be looking at that," he said.
Meanwhile, on the U.S. Gulf Coast, Cheniere Energy Partners LP was the first to propose exports -- these from its Sabine Pass terminal in Cameron Parish, LA. Cheniere has been touting talks with several potential customers, including large utilities in China and Spain (see related story; Daily GPI, Nov. 30, 2010). Also proposed for the Gulf is liquefaction and export from the Freeport LNG terminal on Quintana Island in Brazoria County, TX, by Freeport LNG and Macquarie Energy (see Daily GPI, Nov. 23, 2010).
In December analysts at PIRA Energy Group said in a research note that LNG exports were a "modest" factor in their long-term outlook. They said they expect the Kitimat project to come online in 2014 and reach 0.7 Bcf/d of activity in 2019 (see Daily GPI, Dec. 16, 2010).
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