Thursday July 24, 2014

Getting in the Game

AltaGas takes logical step into LNG business
AltaGas Photo

AltaGas' Younger extraction plant in northeast British Columbia. It is just one part of a diverse energy business that could soon include exporting liquefied natural gas and propane from B.C. to Japan.

Debbie Stein would suggest that it only makes sense for AltaGas to enter the fray of the emerging liquefied natural gas (LNG) export industry in British Columbia.

"We are in the energy business," said the vice president of finance and CFO of the diverse natural gas, power and utilities company.

That business includes the only existing natural gas pipeline to the Pacific Coast, the Pacific Northern Gas (PNG) system, which is the sort of infrastructure that would be an essential piece of any plan to move fuel from the resource plays of northeast B.C. and beyond to liquefaction and export hubs in communities such as Kitimat and Prince Rupert.

However, securing a market for the product is also a critical component of any LNG export enterprise, and Stein believes that AltaGas is in good shape in that regard as well, thanks to their relationship with their equal partner in their plan to export LNG and liquefied petroleum gas (LPG) from Canada to Asia that was announced at the end of January.

That partner is Idemitsu Kosan.

"They're the second largest petroleum company in Japan," Stein said of the other half of the AltaGas Idemitsu Joint Venture Limited Partnership.

"They have a 50 per cent ownership in one of the largest LPG suppliers in the world," she continued. "They don't have natural gas. They don't have LNG. But they have big infrastructure … that they own and operate."

AltaGas does have natural gas in addition to infrastructure in Canada.

"We have organizational capability to build and operate these assets," Stein explained. "We know the natural gas market. We know the basin. We know the producers. So, we believe that there's an opportunity here.

"We're not looking to export 2.0 bcf (billion cubic feet) of gas," she added, noting that that volume is considerably less than other LNG export proposals.

Stein said that Japan has a petrochemical industry hungry for natural gas as well as a high demand for propane, and LPG that hasn't been mentioned in other LNG export projects in B.C.

"What's developing in North America is an oversupply of propane.," said Stein.

"So," she continued, "to the extent that we can find a way to get the propane over there, we believe that there's an opportunity here to export propane. We're going to spend some time looking at how we develop that business opportunity, because there is supply in Canada and there's demand over there. So, we're going to try and find a way to put those two together."

The joint venture partnership will soon be starting discussions to find natural gas suppliers and customers as they launch their feasibility study.

"The feasibility studies will evaluate and develop the commercial arrangements, the capital requirements, the construction plans – all of those things to make this into a business that is profitable for our shareholders and adds value to the Canadians and the Japanese," said Stein.

AltaGas appears confident that the partnership will bear fruit.

"We have the boots on the ground in Canada," said Stein. "They have the boots on the ground over there."

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