AK BC LNG Competition

In the not so far off future LNG may flow from western British Columbia and/or Alaska.  Of course market is increasingly competitive and all proposed projects may not fly. (LINK to Globe and Mail)

Learn more about proposed Canadian LNG projects here (LINK to NEB)

North Slope Producer Applies for LNG Export Licence

If you think this is good news for the Alaska gas line and LNG project you would be wrong.

The 4 BCF / 30 MTPA LNG project is being developed by WCC LNG, an entity owned by  Exxon Mobil and Imperial Oil Resources. The project will be built in the Kitimat and Prince Rupert area.

• LINK TO APPLICATION DOCUMENTS
• LINK TO APPLICATION

There's talk of an Alaska LNG project announcement soon (no later than 30 Jun 13).  That may just be wishful thinking -The WCC application has all but one of the ingredients needed for an Alaska LNG project, i.e. it's not in Alaska.

The project will be based on Canadian shale gas resources but may ultimately recieve gas from other sources:

The LNG Terminal will access gas primarily from the WCSB. Given the  ntegrated nature of the North American gas markets and pipeline network, gas supply could also potentially come from other Canadian or North American basins over the life of the LNG Terminal.

 So maybe some day an Alaska gas line to Canada may send gas to an export terminal in Canada. By someday I mean decades from now.

This news combined with the Petronas Canada LNG project announcement leads me to believe that Canada will export LNG before North Slope gas is exported.


The cost of the WCC project is not stated and the project is not approved yet.  This non-Alaska Exxon Mobil LNG terminal may become a powerful bargaining chip in negotiations with the State of Alaska.  Alaskans won't like that and I'll bet Exxon Mobil comes out the winner no matter which project goes forward.

The good news for Alaska, is that the Canadian upstream is not as developed as the North Slope upstream which means the unit cost of West Coast Canadian LNG may be within 10% of the cost of North Slope LNG exported from South Central Alaska - that 10% may offer room to negotiate.

Shell Canada LNG Export License Application

Since the Alaska Gas Pipeline and LNG plant plans are in yawn mode, take a look at the Export License Application filed by LNG Canada Development Inc., (Shell Canada, Korea Gas, Mitsubishi, and PetroChina) (LINK).

The annual maximum stated in the application is 1180 BCF, or 3.2 BCF/D which is about the same as the various pipeline options proposed for Alaska.

Section 4.4 of Appendix D (Ziff Energy) addresses Alaska Gas projects in very uncertain terms:

The LNG Option is being explored more thoroughly at time of writing. Project estimates for a 3 Bcf/d pipeline to Valdez are in the order of $20-26 Billion. Costs and economics of transporting and liquefying Alaska production will be dependent on many factors including final size and nature of facility and related pipeline, and are unknown at time of writing.

Section 6.3 foresees the possibility of future "Northern Gas"

Northern Gas (Alaska/Mackenzie Delta): could flow beginning in 2025 at the earliest and, assuming favourable economic conditions, could expand up to 7% of North American supply in
2045. Although discussions for a liquefaction facility and pipeline to Valdez, Alaska are at a preliminary stage, these could impact the supply of Northern gas to North America, if economics were favourable to LNG exports. If Northern Gas is transported to Western Canada, the pipelines would be the costliest component of each project, while another $8 Billion would be needed for Mackenzie field development. Once they are built, the pipelines will have a low variable cost and will continue to flow. Expansion projects (compression) will have low incremental cost and will be likely economic.

 Once again we are in hold mode waiting for 30 July Alaska LNG progress report.

Canada LNG

Shell / KOGAS / Mitsubishi / PetroChina have announced a 12 MTPA LNG plant on Canada's west coast (LINK).  That's about half the size of the possible Alaskan LNG project.  The LNG Canada plant will be located in Kitimat B.C. home of another LNG project Kitimat LNG (LINK).  At 5 MTPA the total of the two plants is less than the possible Alaskan LNG project.

I say "possible" Alaskan LNG project for two reasons 1) LNG isn't crude oil, the potential margins and profits are much less,  and 2) Competition is heating up and Alaska is way behind Australia, the U.S. Gulf Coast and now Canada.

Maybe economies of scale will tip the balance, but remember "You can't dabble at LNG"  Alaska continues to lack the key ingredient of buyer participation.  Until a Japanese, Korean, or Chinese LNG buyer signs up for a portion of Alaskan LNG project we're all just dabbling at LNG.

+1 Canadian LNG, -1 Alaska LNG

This week ConocoPhillips purchased Marathon's share of the Kenai LNG plant (LINK) and the Kitimat B.C. LNG project received an export license (LINK).  The Kenai plant is scheduled to be mothballed and may be converted to and IMPORT terminal.  

Neither of these news items are new or shocking, but the stories illustrate Alaska's ongoing failure to compete in gas markets.  One upside, maybe someday Kitimat will export LNG to the Kenai terminal.

The Canadians move ahead

In the snails paced world of arctic gas development the Canadians have pulled ahead. First, Kitimat LNG has awarded a Front End Engineering Design (FEED) contract to KBR, and announced plans to pursue an expansion of their project. The first plant will process 700 million cubic feet per day into about 5.5 million tons per year of LNG. Proposed expansion could add another 1 MTPA capacity. The proposed customers are in Asia and the target sales price of product is quoted at $12/MCF vs. $4/MCF in North American markets for the same gas. The Kitimat volumes are roughly 18% of the volumes of the Alaska Gas Pipeline project. Project description video from Kitimat webpage (LINK).


Secondly, the Canadian National Energy board has given the green light to the Mackenzie pipeline project. When completed the Mackenzie could move up to 1.2 Billion cubic feet per day of gas or about 26% of the capacity of the Alaska Gas Pipeline.

In terms of capacity the two Canadian projects will market about 44% of the volume of the Alaska Gas Pipeline. Best wishes to both projects - It's great to see some forward motion.

Kitimat LNG

Is liquefied northern gas shipped to overseas markets a viable project? These guys think so.

From the Calgary Herald:

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 Kitimat project is worth following for unit cost comparison to the Valdez Alaska Gas Pipeline alternative.