By Gordon Hamilton, Vancouver Sun, October 13, 2011
NEB’s okay opens new markets for Canadian natural gas
VANCOUVER — The National Energy Board has granted a 20-year licence to export liquid natural gas to KM LNG, the consortium with plans to build a liquid natural gas terminal at Kitimat, marking another step toward the construction of a $4.5 billion LNG terminal on B.C.’s west coast.
“It’s a very historic day,” Encana vice-president Alan Boras said in an interview Thursday. Encana is one of three energy companies in the KM LNG partnership. They plan to build an export terminal at Kitimat on B.C.’s west coast and a pipeline west from the gas fields in the province’s northeast.
“Now we have the opportunity to export energy over to the Pacific market and that’s the first time that’s going to happen. It’s a very important step for the project and for the energy industry of British Columbia; of Canada,” Boras said.
Boras described the approval as “the kind of positive step that will move this project forward.”
KM LNG has plans to build a liquefied natural gas plant with the capacity to export 1.4 billion cubic feet of gas a day and a 465-kilometre-long pipeline dubbed the Pacific Trails Pipeline, across the province. KM LNG’s application is the first one ever considered by the board since the 1985 de-regulation of the natural gas market. The NEB licence is for that amount of gas.
In a new release, the NEB stated that the licence was granted because, “The board satisfied itself that the quantity of gas to be exported does not exceed the amount required to meet foreseeable Canadian demand.
“The exported LNG will not only open new markets for Canadian gas production, but the board believes that ongoing development of shale gas resources will ultimately further increase the availability of natural gas for Canadians,” the release stated.
The construction and operation of the pipeline and the terminal will require provincial regulatory decisions.
The board said that in deciding to approve the export application, it took into consideration environmental and socio-economic effects, including the effect of marine shipping. The board also said economic benefits, like employment opportunities, were taken into consideration.
The next step for the partners, Boras said, is to begin front-end engineering studies and step up marketing initiatives in Asia.
“Having this export licence in place will certainly assist that initiative with respect to finding buyers for British Columbia natural gas,” Boras said.
The exploitation of shale gas deposits in North America has resulted in an abundance of gas in North America and opened up the opportunity for exports.
“Natural gas in northeast B.C. is a long way from the major population markets (in North America) but it’s a very prolific potential source. With the need for energy in the Pacific countries in Asia, it’s an ideal fit for working to supply those countries with their energy needs,” Boras said.
KM LNG already has crews at the proposed LNG plant site near Kitimat and expects to make a final decision on the project in 2012. The pipeline and plant are expected to be in operation by 2015.
In a recent conference call with investors, Encana vice-president Dave Thorn said the partners anticipate that the Canadian natural gas will sell in Asia for the equivalent price of crude oil in Japan. Since 2009 in North America, natural gas prices have been depressed because of the shale gas supplies. Natural gas sells for about $12 a unit in Asia compared to $4 a unit in North America.
“The (Asian) demand for natural gas is expected to be very strong through to 2020,” Thorn said. “Countries are seeking to both meet their forecast growth as well as to diversify their sources of supply. The highest growth regions are expected to be India and China.
“Japan is still expected to be a significant market, and depending upon their decision regarding nuclear capacity, could provide additional upside in terms of market growth. And there are a number of other Asian based countries that we anticipate will have growing demand.”
ghamilton@vancouversun.com
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NEB Document Registry for KM Operating Partnership export application
