Governments of Canada’s producing provinces are throwing their weight behind the country’s foray into exporting liquefied natural gas (LNG) to Asia.

The Alberta and British Columbia (BC) energy departments have given support, with no reservations, to KM LNG’s C$4.5-billion plan for overseas shipments from a new tanker terminal on BC’s Pacific coast at Kitimat.

“The recent development of new shale gas extraction techniques has allowed access to vast reserves in northeast British Columbia,” BC deputy energy minister Steve Carr told the National Energy Board (NEB). “LNG export projects are important for building a sustainable natural gas industry in this province.”

The Alberta energy department’s legal counsel, Colin King, told the NEB, “Western Canada has sufficient reserves of natural gas to satisfy current and growing traditional markets and will require access to tidewater markets to encourage sustained development. Without access to new markets, Alberta’s production of natural gas will be less incented to expand. Alberta sees tidewater access as crucial to support the natural gas industry due to the changing nature of competition in North American natural gas markets.”

Although KM LNG expects most of its gas to be produced in BC, Alberta maintains that a successful terminal project will enhance all the Canadian West’s ability to attract international interest.

“Alberta supports the development of optimal export capacity to ensure that western Canada’s considerable energy reserves can continue to attract sufficient attention and investment to be converted into marketable supply,” King said.

The BC and Alberta statements — delivered as final arguments at NEB hearings on KM LNG’s export license application — were an early practical example of declared intentions to widen Canadian energy export markets beyond the United States. The growth ambition emerged as an agreed top priority from an annual conference of the federal and provincial energy ministers, held recently at the Kananaskis Country resort in the Rocky Mountains an hour’s drive west of the Canadian gas capital of Calgary.

Federal Natural Resources Minister Joe Oliver, a veteran investment banker who represents a Toronto-area constituency in Parliament, emerged from the meetings saying, “America is a great customer. But 97% of our energy is being exported to the United States, and we want to diversify to other markets. Asia is growing. China, in particular, is now the largest consumer of energy in the world.”

KM LNG — a partnership of Apache Canada, EOG Resources and Encana Corp. — aims to make a quick start at carrying out the overseas export on a large scale. Its NEB application seeks a 20-year export license for 9.4 Tcf of gas (200 million metric tons of LNG), to be shipped out aboard tankers at a rate of 468 Bcf (10 million metric tons) annually.

As senior partner in the consortium, Apache told the NEB that the project hopes to firm up overseas sales contracts in time to make a final decision on proceeding into construction by the fourth quarter. “There is significant interest,” the company said.

The terminal project — plus an allied pipeline to deliver BC gas to Kitimat, called Pacific Trails — already has BC approvals. Aboriginal co-operation, including a site on native land, has been secured. A national environmental and socio-economic review of the potential tanker traffic is advancing through a procedure called TERMPOL, (technical review process of marine terminal systems and trans-shipment sites).

A wide range of potential customers in Japan, South Korea, Taiwan, China and other Asian countries has been described at the NEB hearings. But exactly who the LNG buyers turn out to be will be a strictly guarded trade secret, if the consortium has its way.

Apache is seeking an exemption from any requirements to identify KM LNG customers, even in confidential reports to the NEB (see NGI, May 2). “Strict adherence to confidentiality of long-term sales and purchase arrangements is of paramount importance to buyers in the region,” the company told the board.

“Unlike North America, instantaneous access to alternative domestic or regional sources of pipeline-connected natural gas supply is not available to buyers. Alternative sources of natural gas supply are not readily available should LNG delivery be curtailed,” Apache said. “It is for this reason that long-term supply reliability is a cornerstone requirement of Asia-Pacific LNG buyers. Long-term LNG supply reliability has become an even more acute consideration given the additional LNG supply challenges now facing Japan arising from the March 2011 earthquakes.”

Separately, BC LNG Export Co-operative LLC, a JV of the Haisla Nation and LNG Partners LLC of Houston (see NGI, March 21), has reported generating a strong response with an initial call for participation in its Kitimat project (see NGI, June 6).

Last month Calgary-based Progress Energy Resources Corp. agreed to sell a half interest in some Montney Shale properties in BC to Malaysia national oil company Petronas for C$1.07 billion. Opportunities to develop other LNG export capacity from the province also are also being considered (see NGI, June 6).

Shell Canada Ltd. has signed on with a trio of Asian partners to explore developing a liquefied natural gas (LNG) export facility on the western coast of Canada (see NGI, July 18).

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