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Petronas has already spent to date: 1. $1.1 billion to invest in NE BCs Montney basin back in 2011; 2. $5.5 billion to purchase Progress Energys remaining assets in NE BC's Montney basin in 2012; 3. Another $1.5 billion to purchase additional assets in NE BC's Montney basin in 2013; 4. Another $130 million to purchase additional assets in NE BC's Montney basin in 2014; 5. $2 billion in 2013, $2.5 billion in 2014, and another $2.5 billion, already underway, this year in order to prove up reserves for its proposed LNG facility; That cumulative investment by Petronas and consortium already adds up to $15.2 BILLION. They aint walkin away. And this illustrative graph from the Wall Street Journal from a few weeks ago showing "Break-Even" price per MMBtu for numerous Australian LNG facilities, the proposed Petronas facility, and a U.S. Gulf coast facility puts things into perspective IMHO: http://si.wsj.net/public/resources/i...1211021843.jpg The break-even prices per MMBtu for Australian LNG ranges from $11.1 to $19.8 per MMBtu. Ouch. No wonder Aussie LNG major Woodside Petroleum have deferred other Aussie LNG projects such as Browse, etc. and have partnered up with Chevron at the proposed Kitimat LNG facility. Yet Petronas is at the bottom at $10.3 per MMBtu. Both Petronas and the Aussie projects are fully integrated in terms of upstream natural gas assets and downstream. Owning the natural gas assets provides a "hedge" against market price fluctuations. We also see the Sabine Pass LNG facility on the U.S. Gulf coast with the lowest "break-even" price at $6.80 per MMBtu. Caveat. Sabine Pass LNG is just a "tolling" LNG facility. IOW, it does not own the source of natural gas, charges Henry Hub prices with large fees, and the LNG buyer must send their own LNG tankers to pick-up the LNG. Completely different model. Compared to BC, transport costs from the U.S. Gulf coast are ~$1.50 to $2 per MMBtu more with the additional 10-days sailing time and the new Panama Canal tariffs. In addition, economic LNG super-tankers such as the "Q-Flex" and "Q-Max" class will not be able to fit into the new Panama Canal. And the Henry Hub price is volatile. Just last winter it spiked quite high, which provides additional risk for LNG buyers. Not to mention hurricane season risk in the U.S. Gulf coast, which can suspend shipping. And just yesterday, Japan, the world's largest LNG buyer no longer has much interest in LNG from the U.S. Gulf Coast, Russia, or Africa due to "geo-political risk". Japan now is focusing on "security of supply". Quote:
Again, that bodes quite well for potential BC LNG proponents as BC is not only quite cost effective in terms of "break-even" price per MMBtu, but is also viewed as a stable political jurisdiction, has equivalent shipping costs to Australia to Tokyo Harbour, and many Japanese firms have made major investments/co-ownership in proposed BC LNG facilities. So yep, 2015 - 2016 will finally bear fruit for several FIDs. And Petronas will be the first out of the gate in April/May. ;) |
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Again, to re-iterate, Petronas' subsidiary Progress Energy has spent/will spend (just in terms of drilling to prove up reserves for LNG export) in the Montney basin as follows: 2013: $2 billion 2014: $2.5 billion 2015: $2.5 billion Those figures, with AECO hub pricing, certainly cannot financially self-support. To put that into further perspective, Encana, Canada's largest natural gas producer, is only committed to spend $600 million in the same Montney basin this year. A current stand-alone natural gas producer would face insolvency and a much worse financial scenario than Talisman's recent fate if the end-game was not something else in the relative short/mid-term future. Methinks. |
Movement forward by CNOC for their LNG plant.
CNOOC picks Digby Island for Aurora LNG project in B.C. VANCOUVER — The Globe and Mail - Tuesday, Jan. 13 2015 http://www.theglobeandmail.com/repor...ticle22436347/ Quote:
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Some movement forward by Woodfibre LNG.
ENVIRONMENTAL ASSESSMENT OFFICE ACCEPTS WOODFIBRE LNG APPLICATION JANUARY 13, 2015 - http://www.woodfibrelng.ca/environme...g-application/ Quote:
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OTOH, CNOOC also picked up some highly lucrative natural gas assets in BC. CNOOC later partnered up with both Japanese INPEX and JGC Corp. for a potential west coast BC LNG facility. Until reading that G & M article, I was unable to ascertain why Aurora LNG decided against Grassy Point near Prince Rupert v. neighbouring Digby Island as the chosen LNG site. "Didn’t like some of geology at Grassy Point”. That's the major tidbit coming out of that G & M article IMHO. BTW, Grassy Point was the first and original proposed LNG terminal site from BC's west coast back circa 1981. A consortium between Calgary's Dome Petroleum and Mitsubishi. Dome Pete (a major O & G player back in the day) subsequently went under due to falling oil prices, high debt load, in conjunction with a then high interest rate regime (prime rate back then peaked ~20%). |
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Good thing interest rates are much lower in 2015! |
Hmmm, interesting. Well I guess we know where all the steel will come from for the gas pipelines...amongst other things.
Stewart World Port: the big LNG port in a tiny Northern B.C. town Daybreak North, CBC News Posted: Feb 04, 2015 4:47 PM PT http://www.cbc.ca/news/canada/britis...town-1.2944900 Quote:
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Oil crash prompts Chevron to cut spending on B.C. LNG project
Bloomberg News - http://business.financialpost.com/20..._lsa=b60d-9f26 Quote:
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Well the feds step up. Great, more tax breaks for the energy industry.
Ottawa tax break boosts B.C. LNG - B.C. and industry welcome announcement, hope it will lead to investment decision this year Vancouver Sun, Feb 19, 2015 Quote:
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It's important to note that all this does is allow construction costs to be deducted more quickly than normal. The companies will still be paying the same amount of tax at the end of the day, the only difference is some will be deferred to later years. In other words it is not a reduction on tax but rather a deferral. With the massive up front costs of these projects this will be very beneficial. |
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The new acceleration of capital cost allowance deductions of 30% (from 8%) for equipment and 10% (from 6%) for buildings will permit LNG proponents to write-off their capital expenditures over 7 years rather than the previous 27 years. To put this matter into perspective, Australian LNG proponents currently can write-off capex over 13 years. |
As for Petronas and their delayed FID on their proposed LNG facility, as I stated before looks like a late spring FID date. More precisely late June, 2015 since that is when the federal CEAO environmental certificate is expected to be issued.
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One final note from a few weeks back, which I forgot to post. On January 30, 2015 Royal Dutch Shell's CEO, Ben van Beurden, confirmed that its proposed Canada LNG facility will receive FID in '15/'16. It's still undergoing environmental assessment.
More important tidbit was the fact the Shell has decided to shelve its proposed Arrow LNG facility in Australia and cast doubt on another proposed Australian LNG facility - Browse LNG. Quote:
BTW, the first phase of Shell's proposed Canada LNG facility comprises 12 million tons/annum in capacity while its proposed much smaller U.S. LNG facility will have 1.5 million tons/annum capacity in its first phase. |
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http://www.theprovince.com/business/...449/story.html |
How much of the production has Petronas parceled out so far? They can always pull the trigger on one production line and leave the second for later.
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Just in from the Malaysian Star newspaper: Petronas will make its final investment decision in June, 2015 (after receipt of CEAA enviro certification) and alludes that FID will be positive:
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^ yes, looks like it will be. Another story 9same sources) to reinforce.
Petronas' final investments decision on B.C. LNG project expected in June BIV - Mar 2, 2015 http://www.biv.com/article/2015/3/pe...ts-decision-b/ Quote:
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