The biggest Canadian liquefied natural gas (LNG) export license yet has been granted for shipments to Asian markets, but no date is set to build any terminals or launch tankers.
The LNG Canada Development Inc. consortium, led by a unit of Royal Dutch Shell plc, last week obtained the third permit from the National Energy Board (NEB) to dedicate production for decades to overseas markets sought by terminal and pipeline plans for the northern Pacific Coast of British Columbia (BC). The facility would be the largest in North America.
The decision authorizes LNG Canada to ship 33 Tcf of gas over 25 years. The whopping package works out to cargoes of 1.2 Tcf/year or 3.2 Bcf/d.
The ruling also acknowledges that, like licenses previously awarded to KM LNG and BC LNG Export Co-operative, the approval only begins a long process of developing the export chain (see NGI, Feb. 13, 2012).
The links, still incomplete in all three cases, include aggressive development of shale gas supplies in northeastern BC with horizontal drilling and hydraulic fracturing, pipeline services, terminal construction and especially long sales contracts with target customers in Japan, China, South Korea, India and other overseas LNG-consumer countries.
A remote sunset clause in the NEB ruling granted LNG Canada 10 years, until Dec. 31, 2022, to complete the supply and sales chain. Similarly long periods to start the action were granted by the board’s previous export license awards. Canadian industry analysts give the LNG Canada consortium favorable odds of carrying out the project, despite undisclosed costs projected to run into the $20 billion-plus range over the lifespan of the scheme’s multiple phases.
The optimism stems from the composition of the group, which includes big overseas LNG buyers. Led and operated by Shell Canada, the consortium includes a Mitsubishi Corp. affiliate (Diamond LNG Canada Ltd.), Korea Gas Corp. subsidiary Kogas Canada Ltd. and an arm of PetroChina Investment (Hong Kong) Ltd. called Phoenix Energy Holdings Ltd. (see NGI, May 21, 2012).
The other holders of Canadian LNG export permits also increasingly have overseas connections. Majority ownership and the operational lead in KM LNG recently were taken over by Chevron Corp. (see NGI, Jan. 7). Recent contracts added Golar LNG Ltd. and Tenaska Marketing Canada to the BC LNG venture.
As in previous LNG export license approvals, the NEB dismissed environmental and aboriginal opposition on grounds that the permit does not authorize any drilling, pipeline or terminal construction projects that can be identified for detailed review.
The practical gas production, transportation and shipping developments will all go through federal and provincial regulatory processes as they emerge from continuing work on putting together supplies and deliveries authorized by the export licenses, the NEB said.
In LNG Canada’s case, the license was granted without public hearings or environmental reviews as the first application to go through a reformed, streamlined procedure laid out by a regulatory reform bill enacted by the Conservative government in Ottawa in mid-2012.
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