Kitimat, just in from the coast in northwestern British Columbia (BC), which has its roots as a company town planned and built in the 1950s by the Aluminum Co. of Canada, is quickly becoming the company town for liquefied natural gas (LNG). Royal Dutch Shell plc on Thursday confirmed that it has purchased an marine import terminal there and now is exploring — with its Asian partners — its potential as an LNG export facility.
Calgary-based Cenovus Energy Inc. said it sold the import terminal to an affiliate of Shell for an undisclosed amount. Cenovus took over the 42,000 b/d facility in 2010 from methanol giant Methanex under a previous agreement with Encana Corp. Cenovus had taken most of Encana’s oil assets when it spun off as a separate, integrated producer in 2009 (see Daily GPI, Dec. 3, 2009).
Cenovus, which paid Methanex about C$40 million for the terminal in 2010, now uses the marine terminal to import about 20% of a light condensate oil, which is uses to dilute raw oilsands bitumen.
A Shell spokesman confirmed that the company and its partners are considering making the import terminal into an export facility for LNG. Shell’s partners include Korea Gas Corp. (Kogas), Mitsubishi Corp. and China National Petroleum Corp.
Shell’s export plan would join at least two already in the works in locations on the Douglas Channel near Kitimat. Encana and Canadian affiliates of Apache Corp. and EOG Resources Inc. are partners in the proposed $4.5 billion KM LNG project, which this month was granted an export license by the National Energy Board (see related story and Daily GPI, Oct. 17). A final investment decision is expected early next year. Encana also said Thursday, by coincidence, that it recently expanded a farm-out agreement with Kogas at in northeast BC (see Daily GPI, Jan. 18).
Encana CEO Randy Eresman said he welcomed the competition during a conference call to discuss the company’s quarterly performance (see related story).
“I think we’ve broadly stated we’d welcome as many LNG export facilities as can be constructed because of the imbalance [in the gas markets] that exists,” Eresman said. “In that respect it’s a great announcement. We look forward to hearing about other ones as well. There’s plenty of room for additional projects on the West Coast. We’re supporters.”
Meanwhile, BC LNG, also known as the Douglas Channel Energy Project after its location in a sheltered fjord on BC’s Pacific coast, is putting together a supply pool or marketing cooperative that calls for LNG exports averaging 5,000 metric tons (250 MMcf) per day by a team of traders and producers (see Daily GPI, Sept. 6). 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. BC LNG is a partnership between LNG Partners LLC of Houston and Haisla Nation, the aboriginal community at the Kitimat location of the terminal.
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