The smallest entry in the lineup to export liquefied natural gas (LNG) from a proposed new terminal at Kitimat on the northern Pacific coast of British Columbia has postponed its original startup date by two years.

BC LNG Export Co-operative LLC set a new target of second-quarter 2015 for shipments to start, in announcements this week of agreements on obtaining and processing northern shale gas for overseas shipments to Asian energy consumers.

The development — a partnership of Kitimat’s aboriginal Haisla Nation and LNG Partners LLC of Houston, also known as Douglass Channel LNG Project — set first-quarter 2013 as its target startup date in its successful 2011 application for a 20-year Canadian export license (see Daily GPI, Feb. 6, 2012).

In granting the approval a year ago, the National Energy Board (NEB) built in a generous allowance for potentially long delays. The document specifies that the 20-year license term only begins running on the date of the first tanker shipment. No deadlines were set for voyages to start.

At the time of the approval, the NEB and BC LNG also both acknowledged that no schedule could be established for the task that industry participants and analysts describe as the hard part of the global gas trade — securing the long supply contracts with overseas customers that are needed to finance export terminal construction.

The board granted the company exemption from a standard Canadian requirement to file sales contracts, on grounds that none existed. No deadlines were set for securing either overseas buyer commitments or binding contracts with B.C. producers.

At the time of the NEB approval, as now, LNG markets were described as highly competitive and liable to become steadily more difficult as potential buyers take advantage of growing numbers of would-be exporters by demanding price concessions.

The lineup of projects aiming to load up tankers with surplus shale gas in Canada and the United States has enabled overseas consumers and distributors to demand pricing indexed to North American markets rather than the former global yardstick of oil, say industry analysts. The emerging competition has shelved high price forecasts which were standard fare at the time BC LNG filed its export license application in 2011, when the old oil-indexed contracts were projected to make tanker cargos of liquefied gas fetch US$11-$18/MMBtu through 2033.

BC LNG’s license authorizes annual exports of up to 1.8 million tonnes (84.5 Bcf), via two production “trains” capable of processing 125 MMcf/d of gas delivered to the plant by pipeline. The program calls for obtaining the BC shale gas from small to medium-sized producers organized into a supply pool.

In addition to postponing its startup date, the company has lowered its first-year delivery target to 700,000 tonnes. The proposed capacity is one-fourth or less the size of other projects in the BC export terminal lineup, which are backed by American, European and Asian oil, gas and tanker shipping conglomerates.

BC LNG said agreements have been secured to add two potential participants to the project: Golar LNG Ltd. and Tenaska Marketing Canada, a division of TMV Corp.

Golar, a Bermuda-based tanker firm, agreed to team up with LNG Partners on “purchase and off-take” arrangements for the proposed export terminal. LNG Partners also agreed to take on responsibility for feed gas supply. Tenaska entered the picture by agreeing to work with LNG Partners on obtaining supplies.

Golar hedged its bets with a statement that said saying its “participation in the project and its commitment to the LNG off-take remains subject to the Company reaching agreement with the current proponents of the Douglass Channel Project for financing of the facilities, and receipt of all permits required for the project to proceed on a firm basis.”

The Bermuda tanker firm is also a candidate to provide the proposed Kitimat terminal. BC LNG’s plans call for use of an economical floating system, rather than building a plant on land.

Golar last November announced an agreement with Keppel Shipyard Ltd. of Singapore to build the first in a planned fleet of floating liquefied natural gas vessels — known as FLNGVs for short — capable of pumping out up to two million tonnes of liquefied gas per year for loading onto outbound long-distance tankers.

Golar already operates three floating storage and regasification vessels — FSRUs, for short — for accepting inbound tanker deliveries and converting their cargos into pipeline shipments to gas users.

Both FLNGVs and FSRUs are conversions of tankers rather than construction of new ships from scratch. Golar said its projects are aimed at taking advantage of an emerging niche in the global LNG trade for alternative terminals that cut costs and reduce environmental issues compared to new sites on land.

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