BG Group has rearranged the natural gas pecking order in the Canadian Northwest, filing with the National Energy Board (NEB) for a liquefied natural gas (LNG) export license that reveals its choice of Spectra Energy’s (Westcoast) jumbo pipeline as its supply line over a TransCanada Corp. rival, along with an expansive roster of Asian customers.
The Spectra pipeline project is virtually the same as one proposed by TransCanada, which has been selected to supply two proposed LNG export projects. Shell Canada Ltd. wants TransCanada to build Coastal GasLink to transport more than 1.7 Bcf/d to Kitimat, BC (see NGI, June 11, 2012). Progress Energy Canada Ltd. also wants TransCanada to build the Prince Rupert Gas Transmission Project as well, which would be similar in scope to BG plans (see NGI, Jan. 14).
Both the Spectra and Progress/TransCanada plans would lay large diameter pipe across 500 miles of northern Canadian wilderness to carry about 3 Bcf/d from the prolific Horn River and Montney shale basins and others. And as for customers, it’s no problem if you market to the world. “In terms of LNG sales, BG Group has large-scale, long-term LNG sales contracts with major buyers in the key LNG markets of Japan, China, India and Chile,” BG’s Prince Rupert project description says.
“BG Group’s contracts with China, at 8.6 million metric tons per year [mmt/y] in total, will make it the largest supplier to this market. BG Group is also the supply aggregator for the Singapore market with exclusivity over the first 3 mmt/y imported.” BG describes the northern Canadian project as an addition to its current supply and sales portfolio as one of the world’s top LNG merchants and transporters.
In the export license application filed at the National Energy Board (NEB), the UK-based BG Group confirms that its Pacific Coast liquefaction plant and tanker dock construction project, called Prince Rupert LNG, rely on the Spectra scheme. A preliminary description of the pipeline proposal has been deposited at the federal Canadian Environmental Assessment Agency (CEAA) and its provincial BC counterpart.
The BG application arrived at the NEB less than three weeks after a TransCanada subsidiary, Prince Rupert Gas Transmission LP, submitted a similar preliminary BC pipeline project description to the CEAA. The TransCanada proposal supports the Pacific Northwest LNG Project, an export scheme under development by Calgary-based Progress Energy and its new owner, Malaysian state gas and oil conglomerate Petronas. The pipeline proposals do not mention each other and are not officially competitors, just as the current entries in the BC LNG lineup portray themselves as a budding industrial sector for harvesting vast northern shale gas deposits instead of rivals for limited markets or supplies.
ExxonMobil Corp. last week became the most recent to throw its hat into the BC LNG ring after the supermajor on Wednesday filed for permission to export 30 mmt/y of LNG from the west coast of British Columbia (see related story). In a partnership with its majority-owned Canadian subsidiary Imperial Oil Ltd., ExxonMobil is assessing potential construction sites in the Kitimat and Prince Rupert areas for an LNG facility — to be known as WCC LNG Ltd. — that would include six processing units.
The Spectra and TransCanada pipe project descriptions outline mirror-image routes that snake through steep foothills, deep valleys, forests, alpine plateaus, muskeg swamps and pass across several ranges of the Rocky and Coastal Mountains. Both proposed pipelines start with inlets near Hudson’s Hope, an old mining and forest-products industry outpost west of the BC gas and oil capital of Fort St. John. Both run westward to Prince Rupert, a railhead and ocean freight port near the international boundary between BC and the Alaska Panhandle.
The route to Prince Rupert is longer and more rugged than another proposed shale gas delivery route, Pacific Trails Pipeline (see Daily GPI, Dec. 26, 2012), to Kitimat, a port at the head of a long ocean fjord that enables Pacific tankers to penetrate far into the coastal mountains. But potential Kitimat terminal and tanker dock sites are booked up by the proposed Northern Gateway oilsands pipeline as well as older LNG projects.
For an estimated C$6-8 billion, Spectra proposes to install 851-872 kilometers (528-540 miles) of pipe between the Hudson’s Hope region and Prince Rupert. The length depends on final choices of route that could include up to 179 kilometers (111 miles) of subsea line to avoid muskeg bogs that are cold northern counterparts to mangrove swamps that line coastlines in hot climate regions. Spectra proposes to lay one or two lines of pipe, 36-48 inches in diameter, capable of fully satisfying BG’s target export terminal size of 2.9 Bcf/d, potentially with ultimate capacity to spare for other LNG projects. The pipeline project sets an in-service target date of late 2018.
The TransCanada-Prince Rupert version of the proposed shale gas delivery route calls for installing 750 kilometers (465 miles) of 48-inch diameter pipe, also in time to begin deliveries in late 2018. The line would open with capacity for 2 Bcf/d, and be capable of increasing the traffic to 3.6 Bcf/d by adding compression later. The length is kept shorter than the Spectra version by assigning construction of the northeastern BC inlet to another TransCanada subsidiary, Nova Gas Transmission.
Both pipelines traverse aboriginal territory that belongs by treaty to the Nisga’a Nation, one of BC’s biggest and most vigorous native societies. Both project sponsors have opened talks with the Nisga’a as well more than 20 other northern aboriginal groups that are liable to claim they are affected by the pipeline plans. Each of the two Prince Rupert pipeline projects would carry enough gas to double BC’s current total output, which has hovered at about 1 Tcf/year while producers await LNG export terminal construction that is forecast to provide access to overseas sales outlets where prices are far higher than on glutted North American markets.
BG’s export license application seeks NEB permission to send up to 1.06 Tcf/year overseas. Terminal and tanker dock projects remain in planning stages and no official cost estimates are provided. Informal forecasts say the operation could eventually cost C$16 billion to build in three stages of about 1 Bcf/d each. BG is asking the NEB to let the project have plenty of time to mature. The filing seeks a sunset clause that will keep the requested export license valid for 10 years before expiring if terminal construction is delayed. BG says partners will be sought for the BC development, potentially reducing its ownership, and risk below 50% by assembling a corporate consortium to finance construction and operations.
“In terms of LNG supply, BG Group has developed a portfolio of flexible LNG volumes utilizing equity LNG as well as LNG supply contracted from third parties under long-term and short-term contracts,” the application states. “This allows the company to deliver its LNG commitments from a variety of sources.” The marketing operation works the same way, as a web of contracts.
BG is also a major capacity holder at Cheniere Energy’s developing Sabine Pass LNG export facility. That tie-up is expected to benefit the Haynesville Shale, in particular, since BG has a 50/50 joint venture with Exco Resources, a major producer and acreage holder in the Haynesville. However, BG late last year said it would scale back its Haynesville drilling on low gas prices.
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