Spain's Gas Natural may take stake in Canadian LNG

COMMENT: Wow. KitimatLNG has MOUs in place now for 70% of its proposed 5 mmtpa LNG export terminal. MOUs, right? An MOU and a contract are different in the same way that one of those Nigerian "I am the daughter of the late General Cheato Scamo" emails or more mildly, a "Congratulations, you may already have won" magazine subscription come-on is different from a cheque.

Still, it is slightly more substantial than it was a year ago, when the company surprised everyone (not least of all its own private shareholders) by announcing that, um, it was now going to be an export terminal, not an import terminal.

Reuters
Mon Jul 6, 2009

• MOU would see Spanish firm take 30 pct Kitimat output
• Has option to take equity stake in LNG terminal
• Follows similar MOU with Korea Gas

CALGARY, Alberta, July 6 (Reuters) - Spanish natural-gas distributor Gas Natural (GAS.MC) agreed on Monday to take 30 percent of the output from a planned liquefied natural-gas facility on Canada's West Coast and may buy a stake in the operation, the proposed plant's operator said in a release.

Closely held Kitimat LNG Inc said it has signed a memorandum of understanding with Gas Natural, which will see the Spanish firm acquire up to 1.6 million tonnes of LNG a year from the Kitimat liquefaction operation for 20 years.

Gas Natural also has an option to take an equity stake in the LNG terminal.

The agreement is the second major supply deal for the Kitimat operation in just over a month. In early June it signed memorandum of understanding with Korea Gas Corp under which Kogas would acquire 2 million tonnes of LNG a year from the terminal for 20 years, with the option to acquire an equity stake in the plant.

The proposed Kitimat plant, on a port in northern British Columbia, would have the capacity to export 3.5 million to 5 million tonnes of super-cooled gas a year, the equivalent of four or five cargoes a month.

Kitimat, which was originally supposed to be an import project, now intends to export LNG from Western Canada to markets across the Pacific in Asia by 2013.

Gas Natural supplies natural gas to 11 million customers in Spain, France, Italy and Latin America, and has a generating arm producing electricity in Spain, Mexico and Puerto Rico.

It is also in a joint venture with Repsol (REP.MC), which operates a fleet of LNG carriers. (Reporting by Scott Haggett; editing by Rob Wilson)

© Thomson Reuters 2009 All rights reserved

LNG pumped about $3B facility near Kitimat

Construction on new natural gas export plant to be completed in 2013

A proposed $3-billion liquid natural gas export facility near Kitimat, B. C., moved a step closer Monday after the signing of a second agreement with a major international customer.

"One after the other like this gains us a lot of momentum, and we are kind of pumped up about it right now," said Rosemary Boulton, president of Kitimat LNG.

Monday's memorandum of understanding is with Gas Natural, a leading European LNG operator, which will purchase 30 per cent of the production from Kitimat for 20 years. In June, Korea Gas Corporation took a 40-per-cent share, and discussions are progressing with other buyers and B. C. gas suppliers.

Boulton said final engineering work will likely begin this fall after all deals and financing are in place, with the goal of starting construction next spring and completion in 2013.

The plant will be on First Nations land, and those communities will receive rent. The jetty will handle one ship at a time, and be able to load in about 24 hours. The company plans to fill at least one ship each week, with future expansion of 50 per cent possible at the site.

The Kitimat LNG facility is 15 kilo-metres west of the existing port of Kitimat, towards open ocean.

Initially proposed five years ago as an importing facility, the recent major gas finds in Northern B. C. and general robust production throughout North America forced a rethink. "Initially it looked like the natural gas supply would be declining, especially with the use of it in the oilsands, but the whole market has switched." said Boulton.

"With this new shale gas, it seemed we were going the wrong way. The market fundamentals supported a reversal of the plant," she said.

Canada produces about 16 billion cubic feet a gas each day, and half goes to the U. S. "There has been concern that the U. S. might not need that much, and if that pushes volumes back into Canada, we will be back to the pre-1985 days when there was a big gas bubble," said Boulton. The Kitimat facility will be able to ship 700 million cubic feet a day of liquefied natural gas to Asian customers, enough to at least dent the market oversupply.

Rob Whitwham, vice-president of pipelines for Spectra Energy Transmission, said "with all the excitement around the huge shale gas plays in the Horn River and Montney areas, the supply picture is very robust in this part of the world."

B. C. gas production is expected to triple to 7.6 billion cubic feet per day in the next decade as gas from these areas arrives in the market. Pacific Trail Pipelines, a joint venture on Kitimat LNG and Pacific Northern Gas, will connect with Spectra's existing pipeline system, which has room for the new northern shale gas.

"This Kitimat LNG facility is a very welcome new market outlet for B. C. gas. It takes both market and supply, and if there is something that can bring things to a grinding halt it is a lack of markets for gas," he said.

dcooper@thejournal.canwest.com

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