Industry backers are putting momentum into Canada's second planned liquefied natural gas (LNG) export terminal planned in British Columbia (BC) as a global sales outlet for small- to medium-sized, independent producers.

"The BC LNG project configuration uniquely provides access to Asian and Pacific Rim markets," Northpoint Energy Ltd. said in a typical submission in support of the venture's application to the National Energy Board (NEB) for a 20-year export license.

The scheme is tailor-made "for the many natural gas producers in the Western Canada Sedimentary Basin that are not directly involved in developing new pipeline capacity or LNG terminal infrastructure," said Northpoint.

BC LNG, also known as the Douglas Channel Energy Project (DCEP) after its location in a sheltered fjord on BC's Pacific coast, is putting together a supply pool or marketing co-operative. The plan calls for exports averaging 5,000 metric tons (250 MMcf) per day by a team of traders and producers. Supplies would be collected from a wide range of BC and Alberta sources using a "nomination procedure" of periodic invitations to contribute variable amounts depending on amounts available from participants.

The operation would be run by a merchant titled DCEP Gas Management Ltd. Named GML for short, the trading house is in turn an affiliate of BC LNG, which is a partnership between LNG Partners LLC of Houston and Haisla Nation, the aboriginal community at the Kitimat location of the terminal.

The operation has obtained a site next to the larger and better known KM LNG plan for a C$4.5 billion, 1.4 Bcf/d operation, which has also secured support from the Haisla.

Like KM LNG sponsors Apache Canada, EOG Resources Canada and Encana Corp., declared supporters of BC LNG have operations in the prolific Horn River Shale gas deposit in northern BC. The differences are that the second export terminal project's backers are mostly smaller and do not have ownership interests in the pipeline or shipping facilities.

The BC LNG supply pool's disclosed founding members to date include seven producers: Northpoint, Birchcliff Energy Ltd., Enerplus Corp., Huron Energy Corp., Painted Pony Petroleum Ltd., Talisman Energy Inc., and Unconventional Gas Resources LP. There are also three marketers: Pacific Gateway Energy Ltd., Tenaska Marketing Canada and Trafigura Beheer B.V.

A fourth marketer, Iberdrola Canada Energy Services Ltd., has offered to provide backup supplies up to the full 250 MMcf/d export target set by BC LNG.

In NEB submissions, BC LNG has acknowledged that it does not have firm supply contracts that commit its supporters to provide gas after the terminal is built and ready to start operations in a forecast 30 months. As a result, the project is asking the board to relax its traditional requirements for a long gas export license to be supported by dedicated supplies.

The change represents an evolutionary next step for Canadian deregulation -- and a necessary one for marrying demands for long contracts by Asian customers and the short transaction pattern on North American markets, BC LNG said. The supply co-op structure is designed to make the marriage possible, BC LNG said.

"Balancing export demand with Canadian producers' supply, through periodic nominations, is the most efficient method of letting the market optimize export opportunities for Canadian gas," the project has told the NEB. "Participants in the nomination process will be free to nominate for the term they select. Future nominations will be sought as necessary, based on the terms chosen by participants in response to market forces."

Review of the scheme continues before the NEB. Fresh support letters for BC LNG arrived at the board in response to a procedural deadline. A date for hearings has yet to be set.

But the board has effectively agreed to consider the request for adding an LNG variation to Canada's gas export license rules in an initial list of issues that it will consider as the case advances. Topics that will be covered include "overseas gas markets and the adequacy of gas export sales arrangements," as well as the standard regulatory review of "adequacy of natural gas supply to support the volumes and term of the applied-for license," the NEB said.

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