Canada is a relative newcomer in the global market for liquefied natural gas (LNG). Currently, natural gas prices in North American markets are significantly lower than world markets, reflecting the significant surplus supply that exists in the North American market. The discounted value of North American natural gas compared to its value in the rest of the world is expected to persist for a significant period. For Canadian producers, LNG exports offer the opportunity to access international markets and potential exposure to higher international prices.
The British Columbia provincial government has expressed support for the development of LNG export capacity within the province. In September 2011 the provincial government released Canada Starts Here: The BC Jobs Plan. According to the plan, the provincial government has set a target of 3 LNG facilities to be in operation by 2020. It is estimated that in the past year over $6 billion in investment have been made to acquire upstream natural gas assets and to execute joint ventures in the province. In addition, the provincial government estimates that up to $1 billion has been spent to prepare for the construction of LNG infrastructure in the province.
Recently the Ministry of Forests, Lands and Natural Resource Operations in partnership with the Ministry of Energy, Mines and Natural Gas announced that it is establishing a list of pre-qualified proponents who are interested in acquiring Crown land for the purposes of developing a LNG plant marine export terminal at Grassy Point near prince Rupert, British Columbia.
Imperial Oil Ltd./Exxon Mobil, Nexen Inc./INPEX, Australia's Woodside Petroleum Ltd. and South Korea based SK E&S have recently submitted non-binding expressions of interest for Crown land at Grassy Point, British Columbia. The submissions are a preliminary step toward evaluating how many LNG sites the Grassy Point location can accommodate.
The following is a brief summary of the proposed LNG export facilities in the province of British Columbia announced to date.
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AltaGas Idemitsu Joint Venture
Idemitsu Kosan Co. Ltd. and AltaGas Ltd. have entered into an agreement to form AltaGas Idemitsu Joint Venture Limited Partnership. The partnership plans to pursue opportunities to export LNG as well as liquefied petroleum gas from British Columbia to Asia. Idemitsu Kosan Co. Ltd. and AltaGas Ltd. each own a 50% interest in the partnership. The pipeline capacity required to transport natural gas to the LNG export facility is expected to be provided by Pacific Northern Gas Ltd., a wholly owned subsidiary of AltaGas Ltd. Under preliminary plans, LNG feasibility studies are anticipated to be completed in 2014 with an LNG export terminal in service by as early as 2017.
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LNG Canada
LNG Canada is proposing to build a LNG export terminal in Kitmat, British Columbia. LNG Canada is a joint venture comprised of Shell Canada Ltd., Korea Gas Corporation, Mitsubishi Corporation and PetroChina Company Limited. The export facility is expected to have an export capacity of 2-3 billion cubic feet a day (Bcf/day). On July 27, 2012, LNG Canada applied to the National Energy Board (NEB) for a licence authorizing the export of up to 24 million tonnes of LNG per year, for a term of 25 years. On February 4, 2013, LNG Canada received approval from the NEB for a licence authorizing the export of up to 24 million tonnes of LNG per year for a term of 25 years. The project is currently undergoing an environmental assessment.
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Kitimat LNG
Apache Canada Ltd. and Chevron Canada Limited each own 50 percent of the Kitimat LNG project. The facility is expected to have an export capacity of 0.75-1.50 Bcf/day. On December 9, 2010 Kitimat LNG applied to the NEB for an export licence authorizing the export of up to 468 Bcf per year for a term of 20 years. The NEB granted the export licence in October of 2011. The project is currently undergoing an environmental assessment.
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Pacific NorthWest LNG
Pacific NorthWest LNG is a proposed LNG export facility on Lelu Island within the district of Port Edward on land administered by the Port of Prince Rupert. The companies sponsoring the project are Progress Energy Canada Ltd. and Petroliam Nasional Berhad (Petronas). The facility is expected to have a capacity of 1-2 Bcf/day. It is anticipated that detailed design of the facility will begin in late spring 2013. Construction is anticipated to begin by early 2015, with the earliest LNG shipments to customers occurring in late 2018. On February 19, 2013, Pacific NorthWest LNG submitted their project description to the Canadian Environmental Assessment Agency (CEAA). Currently CEAA is determining whether an environmental assessment is required for the designated project.
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BC LNG Export Co-Operative
BC LNG Export Co-Operative (BC LNG) will be operated by Douglas Channel Energy Partners, which is a partnership between LNG Partners and the Haisla Nation in British Columbia. Currently, there are 16 members of the Co-operative. All members will be entitled to submit bids to supply natural gas to be liquefied and/or submit bids to purchase all LNG exported by the Co-Operative. The facility is expected to have an export capacity of 0.10 Bcf/day. On March 8 2011, BC LNG applied to the NEB for a licence to export 1.8 million tonnes per annum of LNG for a term of 20 years. The NEB granted BC LNG a 20 year licence for the export of 1.8 million tonnes of LNG annually. Recently, Golar LNG, an Asian and Bermuda-based company that runs a fleet of LNG tankers, announced they have purchased a 25 per cent stake in the project.
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Imperial Oil/Exxon LNG Project
Imperial Oil Ltd. and its parent, Exxon Mobil Corp., are in the early stages of planning a LNG export business from British Columbia. The facility will build on their $3.1 billion acquisition of natural gas producer Celtic Exploration Ltd., as well as gas holdings they already own in western Alberta and in the Horn River shale gas play in British Columbia. The capacity of the facility has not yet been disclosed. As discussed below, Imperial Oil Ltd./Exxon Mobil have recently submitted non-binding expressions of interest to acquire Crown land at Grassy Point, British Columbia for development of an LNG export facility.
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Prince Rupert LNG
BG Group Plc (BG Group) is in the early stages of developing the Prince Rupert LNG project. Recently, BG Group announced its plan to invest $16 billion in the proposed export terminal which is expected to have an export capacity of 3.3 Bcf/day. BG Group has also announced plans to partner with Spectra Energy Corp. to build a pipeline capable of transporting up to 4.2 Bcf/day of natural gas from production areas in northeastern British Columbia to the Prince Rupert LNG facility for export.
BG Group has secured an agreement with the Prince Rupert Port Authority to study the feasibility of an LNG export terminal on port lands. Plans call for a final investment decision to come sometime in the next few years. On May 2, 2013 BG Group submitted a project description to CEAA and the British Columbia Environmental Assessment Office.
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Nexen/Inpex LNG Project
Nexen Inc. and a consortium led by Japan's Inpex Corp. have a joint venture to develop unconventional shale gas assets in the Horn River, Cordova and Liard basins in northeastern British Columbia. As part of the joint venture, the partners intend to jointly investigate the feasibility of a potential downstream project, including an LNG export facility.
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Kitisualt Energy LNG Project
Kitisualt Energy intends to establish a LNG export facility at Kitisualt, BC. The plan is in its infancy and Kitisualt Energy has not yet announced export capacity for the proposed facility.
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