Sunday, May 29, 2011

More LNG exports considered

This time Shell is considering LNG exports to Asia from B.C. From the Vancouver Sun:

In Canada, Shell Canada paid $5.9 billion in 2008 to buy Duvernay Oil Co., a major player in B.C.’s Montney shale gas deposit near Dawson Creek.

Petroleum Intelligence Weekly reported shortly after the Japanese tsunami in March that, as a result of the destruction of two nuclear reactors there, “Shell and its Asian partners could scale their proposed Prince Rupert plant in British Columbia toward the top end of its mooted 8.5 million-14.0 million tonnes/year range.”
Those volumes equal 25% to 40% of the capacity of the Alaska Gas Pipeline (4.5 BCFD). A pipeline from Dawson Creek to Prince Rupert would be about 400+ miles long as the raven fly vs. 800+ miles for a North Slope to Valdez line. Based on flow rates the line would be 24" to 30" vs. 48" for the proposed Alaska Gas Pipeline.

I have mixed feelings about this story - First it's good to see North American shale gas sponged up for export, however my "something is not right here" alarm is going off. If an Alaska LNG plant at Valdez is not feasible, exporting LNG to Asia at $12/MMBTU - how can a smaller plant be justified in Canada? In Alaska, the wells are drilled, in Canada (shale gas) wells are yet to be drilled, and shale gas completions are not cheap.

Update: More from Petroleum News (Link). Perhaps the "Floating Technology" will play a role enabling plant owners the chance to drag up and move the plant if and when the return on capital employed drops below other opportunities.

Economy of scale should work in favor of Alaska - double the length of the pipeline for more than double the amount of gas. Of course economy of scale drop for smaller Valdez LNG plant options (LINK to AGIA Findings LNG Chapter).

Something to keep an eye on. And by the way - where's the Asian interest in Alaska gas?

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