Thursday July 24, 2014

NEB Gets Another Application Proposing To Export LNG Off B.C. Coast

The National Energy Board has received a second application seeking approval to export liquefied natural gas from British Columbia’s North Coast near Kitimat.

B.C. LNG Export Co-Operative LLC last week filed an application with the board for a licence to export LNG from a point on Douglas Channel for a 20-year term. The group has a small-scale LNG liquefaction facility planned for the area. The LNG would be exported to Asian markets in China, India, Japan, South Korea and Taiwan as well as other potential markets in the Pacific Rim.

Late last year, the NEB received its first export application from KM LNG Operating General Partnership which is owned by Apache Canada Ltd. (51 per cent) and EOG Resources Canada Inc. (49 per cent) (DOB Dec. 20, 2010).

The latest application relates to a proposed facility that will be operated by Douglas Channel Energy Partnership (DCEP). The LNG facility will be developed and owned by Douglas Channel LNG Assets Partnership (DC Assets), a related entity of DCEP.

DCEP will operate the facility to provide liquefaction services to DCEP Gas Management Ltd. (GML), a related entity of DCEP. GML will purchase a supply of natural gas from producers and marketers and will arrange for transport to the LNG facility. GML will sell the LNG produced by the facility to the applicant for export.

GML has entered into a firm LNG sale and purchase agreement with the applicant for purchase of the full capacity of the LNG facility for 20 years.

Assuming that an export licence is issued, DCEP anticipates the LNG facility will be commissioned and GML will be able to start sales to BC LNG by the fourth quarter of 2013.

The applicant is currently indirectly owned by LNG Partners, LLC of Houston, Texas and HN DC LNG Limited Partnership, each with a 50 per cent interest.

“The concept here is for a separate small-scale facility,” Tom Tatham, managing director of LNG Partners, told the Bulletin. “This is not part of the Apache/EOG project, this is separate.

“The project description has been filed with the Canadian Environmental Assessment Agency,” he added. “The initial facility will be built to handle up to (125 mmcf) per day of feed gas supply.”

LNG Partners, a Delaware limited liability company, is a closely held private equity firm formed in 2000 with its headquarters in Houston. Since inception, the firm has focused on investment and development within various segments of the LNG supply chain including small-scale LNG liquefaction, LNG shipping and storage optimization and niche regasification facilities. Its ownership group and senior management team, led by Tatham, has over 100 years experience in the upstream, midstream, LNG and marine construction energy sectors, the filing said.

According to a project description, there are two options being considered for the proposed LNG production facilities. The first is a barge-based liquefaction facility and would be either moored or grounded at the project site.

The second is land based liquefaction facility. At present, the LNG facilities are designed to convert up to 125 mmcf per day of natural gas into approximately 900,000 tonnes per annum of LNG at full capacity. Initial LNG production will be approximately 700,000 tonnes per annum based upon DCEP contracted transportation agreement and Pacific Northern Gas’s estimates of available pipeline capacity from its existing system.

“We didn’t put the cost in the application,” Tatham said. “We’re actually making the FEED awards for the engineering design here in the next week. We expect based on our pre-FEED work and on the estimates that were provided then that the cost will be somewhere between $400 and $500 per tonne of liquefaction capacity built.”

The H limited partnership was established for the benefit of the Haisla Nation, many of whom reside at Kitamaat Village at the head of Douglas Channel. It was created to provide the Haisla Nation a vehicle through which to pursue and otherwise engage in the LNG industry in Western Canada. The traditional territory of the Haisla Nation is situated along the province’s North Coast.

The LNG facility, including all associated infrastructure, will be owned by DC assets and operated by DCEP. The facility is designed in modules or trains, each capable of converting 125 mmcf per day of natural gas into 900,000 tonnes of LNG annually and each train can be added as a distinct project. The first train is intended to be completed in 2013.

To facilitate timely response to the anticipated levels of interest once sufficient transportation service is available to support a second train, BC LNG seeks authorization in this application to export the output of two trains converting 250 mmcf per day into 1.8 million tonnes of LNG annually.

DCEP said it has been in active commercial discussions with “significant producers and marketers of natural gas in and from the WCSB.” These discussions have led to formal expressions of interest from suppliers seeking to provide more than sufficient gas to support one 900,000 annual tonnes train at the LNG facility, the application said.

GML is conducting a public process to get expressions of interest (RFEI) from producers and marketers to identify the quantities and price of natural gas they wish to provide to GML and the term for which they wish to commit. Producers and marketers who commit to sell natural gas to GML will also be provided with the opportunity to become a participant in BC LNG, the application stated.

The natural gas supplied to GML will be transported on the system of Westcoast Energy Inc., doing business as Spectra Energy Transmission, to the interconnect with the PNG system for delivery to the LNG facility.

PNG entered into a firm and interruptible gas transportation services agreement (GTSA) on May 26, 2010 which was assigned to LNG Partners, LLC on Dec. 16, 2010.

The transportation services agreeement provides LNG Partners or its assignee with the right, but not the obligation, to transport 80 mmcf per day from Prince George to Kitimat on a firm basis and also to transport any additional volumes available from time to time on the PNG system on an interruptible basis.

Option payments totaling $4.5 million to date have been made under this agreement as required with the most recent payment of $1 million having been paid on Dec. 31, 2010.

The transmission capacity held by LNG Partners through the GTSA may be assigned to GML and will be exclusively dedicated to the transportation of natural gas to the LNG facility. PNG has advised LNG Partners that in addition to firm transportation, it expects to be able to move on average at least another 13 mmcf per day on an interruptible basis on its existing facilities and will make that capacity available to permit those additional volumes to be transported to the LNG facility.

LNG partners has also initiated discussions with PNG to acquire any additional excess capacity should PNG’s other load decline or PNG expand its existing pipeline capacity. A similar request has been made to Pacific Trail Pipelines (PTP) to support the delivery of additional volumes to the LNG facility. PTP is the proponent of a substantial new natural gas pipeline proposed to provide supply to KM LNG if its project proceeds. However, transportation rights held by LNG partners on the PNG system are sufficient to carry enough natural gas to the LNG facility to permit DCEP and its related parties to construct and operate the LNG facility.

The Haisla Nation is a participant in PTP and intends to obtain available capacity on that pipeline sufficient to provide the additional volume required to fully supply the liquefaction capacity of two trains at the LNG facility, the application said.

Spectra has advised GML that it has been in discussions with KM LNG and the proponents of the PTP and has committed that if the PTP is built, it will seek to expand the T-North and T- South systems sufficiently to provide the full requirements of PTP at Summit Lake, the filing stated.

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