By Dina O'Meara, Calgary Herald, December 10, 2010
Licence would be a first for Canada
Apache Canada has applied for Canada's first LNG export licence for the Kitimat, B.C. terminal seen in this artist's rendition.(External, Vancouver Sun) |
CALGARY - Apache Corporation has applied to become Canada's first exporter of liquefied natural gas, setting in regulatory motion a new outlet for an over-stocked, under-priced resource.
The largest independent oil and gas producer in the United States filed for a 20-year licence to export super-cooled gas from a proposed terminal in Bish Cove, British Columbia, according to subsidiary Apache Canada Friday.
"The exportation of LNG is an important step forward for the Canadian natural gas industry and offers substantial benefits to the province of British Columbia in particular," said Janine McArdle, president of operator and Apache subsidiary KM LNG. "The applied-for authorization will demonstrate Canadian LNG is a secure and reliable source of supply that can compete for market share in the Asia Pacific region."
The $3.5-billion US Kitimat facility, jointly owned by Apache Corp. at 51 per cent and EOG Resources Canada, at 49 per cent, will have an initial capacity of five million tons per annum of the condensed resource. Increased demand could see expansion to 10 mmtpa, Apache said.
The terminal would open a door to new markets for western Canadian natural gas production being displaced by a glut of shale gas production from the United States.
Natural gas futures have fallen about 35 per cent in 2010, dropping sharply from a high of $6 US the first week of January to a low of $3.29 US in October.
Spot prices at Canadian benchmark hub AECO have averaged $3.79 this year.
While the joint venture faces competition from Russian, Middle Eastern and Australian LNG sources, the B.C. project has little competition in North America.
Earlier this year Cheniere Energy Partners applied with U.S. federal regulators to convert its Sabine Pass LNG import terminal in Louisiana to an export facility.
If approved and built, it would the first LNG export terminal in the Lower 48 states; the Kenai LNG terminal in Alaska, owned by ConocoPhillips and Marathon Oil Corp., has been exporting the fuel for 30 years but has a relatively small capacity of 1.4 million tons per annum.
"Although the duo faces higher construction costs than Cheniere, the Kitimat facility's location in British Columbia reduces shipping times, while the region also has a strong history of trade with Asia," said analyst Peter Stass, for Investment Daily, in the fall.
Apache and EOG will be providing the natural gas supply for the LNG project, primarily through their Horn River Basin shale gas venture, for commercial launch at the end of 2015. The companies also have secured a memorandum of understanding with Korea Gas Corp, the world's largest LNG importer, to supply 40 per cent of Kitimat's output for 20 years.
"Every piece of the project factors in to making the project economic and make it appealing to customer," said Apache spokeswoman Natalie Poole-Moffatt.
"It's a good, stable supply of gas in a good country, and those things factor well for us."
Initial front-end engineering and design work on the terminal will start in the new year, and the corporation expects to announce its final investment decision on the project by the end of 2011, she said.
domeara@calgaryherald.com
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