Proposed West Coast BC LNG Terminals

[Stingray2004]

Originally Posted by craneSpotter

well, an update from Exxon. Their time-line was submitted along with their application to the BC Environmental Assessment office. Hope to have their environmental certificate by 2016, and go from there. Makes me think that a positive FID from Petronas this year is more likely.

Regarding Petronas, and again to re-iterate on what they are now "out-of-pocket" to date in terms of their proposed westcoast BC LNG facility:

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:



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".

Credit ­Suisse analysts who released a report over the weekend said Japan, the world’s biggest LNG buyer, was no longer as interested in fostering LNG development from the US, Russia and East Africa as it had been a year ago.

“We believe we are moving into a new phase where the world’s largest LNG off-taker will de-emphasise its recent focus on US-linked LNG pricing and refocus on energy security in light of the geopolitical risks concerning gas supply (US-Russia) and marine disruptions in the South China Sea, which 60 per cent of Japanese LNG currently passes through,” Credit Suisse said.

http://www.theaustralian.com.au/busi...-1227181485472

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.

[MalcolmTucker]

Originally Posted by Stingray2004

That cumulative investment by Petronas and consortium already adds up to $15.2 BILLION. They aint walkin away.

I think you misunderstand the nature of the investment so far, because they bought in a low natural gas price environment. They are not sunk costs that are useless if LNG isn't built in the next 5-10 years. The assets can definitely self support until the global market improves. Heck, it is possible that north american prices will be better than world prices for a while (when you account for the liquefaction cost).

[Stingray2004]

Originally Posted by MalcolmTucker

I think you misunderstand the nature of the investment so far, because they bought in a low natural gas price environment. They are not sunk costs that are useless if LNG isn't built in the next 5-10 years. The assets can definitely self support until the global market improves.

You need to put that ~$15 billion invested to date by Petronas in perspective though. Firstly, Petronas purchased Progress Energy at ~ an 80% premium over market value.

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.

[craneSpotter]

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/

China’s CNOOC Ltd. has selected a B.C. island location near the community of Prince Rupert for its liquefied natural gas project.

The goal is to locate an LNG terminal on up to 400 hectares of provincial Crown land on Digby Island, only 3.5 kilometres away from Prince Rupert Airport, according to a new filing this week by CNOOC-led Aurora LNG to the B.C. Environmental Assessment Office...

...Beijing-based CNOOC, through its Canadian unit Nexen Energy ULC, had been examining Digby Island and Grassy Point, located north of Prince Rupert, on its shortlist of two sites, but dropped Grassy Point last week.

Aurora LNG has now pinpointed the Digby Island property as the site for an export project costing up to $20-billion. Nearly 5,000 construction workers would be required at the peak.

In an internal newsletter, Aurora LNG said field work on Digby Island will start in January to “map locations of important habitat, which may support plant and wildlife species at risk.” The consortium added that its employees have been “working with First Nations, local communities and other stakeholders to understand concerns and views regarding the project.”

[craneSpotter]

Some movement forward by Woodfibre LNG.

ENVIRONMENTAL ASSESSMENT OFFICE ACCEPTS WOODFIBRE LNG APPLICATION

JANUARY 13, 2015 - http://www.woodfibrelng.ca/environme...g-application/

SQUAMISH, B.C. – Woodfibre LNG today announced that the Environmental Assessment Office has accepted its application for an Environmental Assessment Certificate. The Project will now enter a 180-day Application Review Phase on January 13, 2015.

[Stingray2004]

Originally Posted by craneSpotter

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/

Back when CNOOC picked up struggling Nexen, Nexen shareholders must have partied all night long. It was well-known that Nexen's oil sands asset, Long Lake in AB, was a complete "dog", so to speak.

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%).

[craneSpotter]

Originally Posted by Stingray2004

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%).

I didn't know that re: Grassy Point. Thanks.

Good thing interest rates are much lower in 2015!

[craneSpotter]

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

Amidst all the talk about B.C.'s ports in Kitimat and Prince Rupert, you may have missed the announcement about another international port in Stewart, B.C. — a small district of fewer than 500 people near the Alaska border.

Set to open in June, Stewart World Port will see massive, football-field sized ships sailing past the ice-capped mountains of the Portland Canal, bringing in infrastructure for mining projects, tubes for LNG pipelines and possibly equipment to serve the forestry industry in the future.

"Stewart is right on the cusp. They're uniquely positioned in the heart of one of the most mineral rich regions in North America," Brad Moffat — the chief development officer for the Stewart World Port — told Daybreak North's Russell Bowers.

"On top of that they're on the doorstep of the Yukon and Northern Alberta, so perfectly set up for breakbulk cargos to both of those destinations as well."

Once operational, it will be the most northerly ice free port in Canada, and will serve both British Columbia and Alaska, exporting mineral concentrate, coal and forestry products.

[craneSpotter]

Oil crash prompts Chevron to cut spending on B.C. LNG project

Bloomberg News - http://business.financialpost.com/20..._lsa=b60d-9f26

Chevron Corp. is significantly slowing spending on the Kitimat liquefied natural gas project in Canada amid a crash in crude prices and global competition.

The San Ramon, California-based producer’s move follows Petroliam Nasional Bhd.’s December delay of a final investment decision on its $36 billion Canadian LNG project and BG Group Plc’s pause of development at its Pacific Coast proposal in the country in October...

...While Chevron curbs spending for Kitimat LNG, it will continue to develop gas fields in British Columbia’s Liard Basin to support the export facility, secure permits and reach agreements with aboriginal groups, Watson said. The company is aligned with Woodside Petroleum Ltd. on the project, he said.

Woodside in December agreed to pay Apache Corp. $2.75 billion for stakes in the Kitimat LNG project and the Wheatstone venture in Australia.

Chevron will also continue efforts to secure marketing agreements with prospective buyers from Kitimat LNG in 2015 and negotiate with the British Columbia government on its policies, Ray Lord, a spokesman for the company, said in an e-mail. Front- end engineering and design work will continue, as the companies try to reduce costs of the plant and pipeline, he said.

[craneSpotter]

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

A federal government tax break to the liquefied natural gas industry announced Thursday was extolled by industry and Premier Christy Clark as making B.C. more competitive globally.

The federal tax break will last until 2024, Prime Minister Stephen Harper announced at a news conference in Surrey.

The break will save the industry a total of about $50 million over five years starting in 2015-16, but savings are expected to increase in later years if the industry grows as expected, said a federal government spokesperson.

Clark quickly thanked Harper for listening to the plea from the B.C. industry, which is still at the proposal stage.

Clark told reporters that B.C. already has a cost system competitive with Australia, but it must be competitive with U.S. jurisdictions, including the West Coast and the South. Australia is already a world-leading LNG exporter, while the U.S., like Canada, is trying to create a new LNG industry to export its vast supplies of gas to energy-hungry Asia.



Read more: http://www.vancouversun.com/Ottawa+b...#ixzz3SIx1D2xE

[lubicon]

Originally Posted by craneSpotter

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

Not sure if this is meant as you are supportive or opposed to the changes?

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.

[Stingray2004]

Originally Posted by lubicon

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.

Very true. In fact separate LNG proponents as well as the LNG umbrella group, BC LNG Alliance, have been clamouring for same since back in 2012. Very good news from their perspective and moves the needle closer to the mark for many.

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.

[Stingray2004]

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.

After Delay In LNG Deal, Petronas Chiefs To Visit B.C. In March

BRENT JANG
VANCOUVER — The Globe and Mail
Published Sunday, Feb. 22 2015, 4:27 PM EST

A major B.C. LNG project put on hold by Petronas in December is showing signs of a revival as three executives from the Malaysian energy giant prepare to visit Canada.

The Pacific NorthWest LNG joint venture, led by Malaysia’s state-owned Petronas, is positioned to become the first major exporter of liquefied natural gas from Canada, despite a delay that has lasted nearly three months.

On Dec. 3, Petronas and its four Asian partners placed the venture on hold indefinitely due to anticipated high capital costs that make the project uneconomic to build.

Since then, Petronas-led Pacific NorthWest LNG has made progress in extracting cost savings from prospective contractors and suppliers, B.C. Deputy Premier Rich Coleman said. “Evidently, those costs have come down dramatically,” he said in an interview.

Incoming Petronas chief executive officer Wan Zulkiflee Wan Ariffin will travel to Vancouver to meet with B.C. Premier Christy Clark and Mr. Coleman.

Mr. Coleman, who is also the cabinet minister in charge of LNG, said he is encouraged by the upcoming visit by Mr. Wan Zulkiflee, current Petronas CEO Shamsul Azhar Abbas and Petronas executive vice-president Wee Yiaw Hin.

The two sides are aiming to gather in March, subject to scheduling mutually agreeable times.

Mr. Wan Zulkiflee, currently Petronas chief operating officer, will become the Malaysian energy company’s CEO on April 1. He is “already familiar with the project. I’ve met this gentleman before at other meetings,” Mr. Coleman said.

The Petronas-led group estimates that $36-billion will need to be spent in order to achieve planned exports to Asia in 2019. The huge budget includes $6.7-billion in two pipeline projects and $11.4-billion for the export plant at Lelu Island, located near Prince Rupert in northwestern British Columbia.

“Petronas and the B.C. government have enjoyed a constructive relationship over the past two years, exemplified by the progress we have made in our efforts to build the first world-scale LNG facility in Canada,” Pacific NorthWest LNG president Michael Culbert said in a statement to The Globe and Mail.

Industry analysts say that before making a final investment decision, Pacific NorthWest LNG will wait for the federal environmental regulator to release its findings.

The Canadian Environmental Assessment Agency’s review of Pacific NorthWest LNG is expected to be completed by the end of June. Pacific NorthWest LNG received clearance in November from the B.C. Environmental Assessment Office, but the CEAA is the lead regulator on the file.

http://www.theglobeandmail.com/repor...ticle23141240/

[Stingray2004]

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.

"We are prioiritising North America LNG options in that timeframe, LNG Canada and Elba," Royal Dutch Shell's CEO, Ben van Beurden explained, referring to Shell's LNG export projects in western Canada and the US state of Georgia.

http://www.smh.com.au/business/shell...30-131sqe.html

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.

[craneSpotter]

Originally Posted by Stingray2004

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.



http://www.theglobeandmail.com/repor...ticle23141240/

I think this is promising news.

[craneSpotter]

Originally Posted by Stingray2004

Very true. In fact separate LNG proponents as well as the LNG umbrella group, BC LNG Alliance, have been clamouring for same since back in 2012. Very good news from their perspective and moves the needle closer to the mark for many.

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.

Yes, I think Canada is trying to be more competitive with a few US proposals at this point. We were already considered fairly competitive with Australia, no?

[jawagord]

Originally Posted by craneSpotter

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

Being competitive with Australia doesn't cut it anymore. I expect BC government will be forced to bring in additional front end tax breaks to encourage investment but with LNG prices continuing to fall it will be a challenge to the economics of these projects.

http://www.theprovince.com/business/...449/story.html

[MalcolmTucker]

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.

[Stingray2004]

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:

Malaysian Star Online

Business NewsHome › Business › Business News

Canada Project On Track

Saturday, 28 February 2015

PETROLIAM Nasional Bhd (Petronas) will make a final investment decision (FID) on a project to build a multi-billion-ringgit liquefied natural gas (LNG) export terminal in British Columbia, Canada, by June this year.

However, president and chief executive officer Tan Sri Shamsul Azhar Abbas has alluded that the national oil company would pursue the development as it has received what it wanted from the Government and was waiting for further approvals.

“The issues outstanding with the local provincial government and the Canadian government have been resolved. The capital allowance will be given, which will further improve the economics of the project,” he said yesterday.

Shamsul said that the FID was in June because the Environmental Impact Assessment report would only be out in April.

“We have until June to make a decision. There is no hurry,” he said.

He also dismissed speculation that Petronas was considering walking out of the project because of the economics.

“Enough of such speculation …we can wait until the end of June and still complete it within time,” he reiterated.

Petronas will be re-bidding the tenders for the job to build the LNG plant because cost has come down with the decline in oil and gas prices.

“We have aborted the bidding process so that we can call for fresh bids. The prices have come down,” he said.

Last year, Petronas had wanted to walk away from building the US$32bil project called the Pacific Northwest LNG export facility because of tax laws that were seen as prohibiting and unwelcoming of foreign investments into the sector.

The British Columbia tax system entails a small upfront tax rate that escalates as the project begins to pay dividends. Politicians see the tax regime as one that could earn the British Columbia government billions from the business of facilitating the export of LNG.

However, it has been reported that the problem was that the economics of the project were already marginal and a restrictive tax regime would make it uneconomical. To compound further the problem was that demand for LNG was weak.

Market conditions put pressure on the British Columbia government, which has since relented.

Shamsul also said that Petronas would be disposing up to a 12% stake in the LNG project to a China company, as it seeks to reduce its stake to about 50%.

So far, it has already divested 38% to parties that include Indian Oil Corp, Japan Petroleum Exploration Co and Brunei National Petroleum Co.

The LNG terminal is part of Petronas’ foray into Canada where it also acquired Progress Energy Resources Corp in 2012 that gave it vast acreage to produce shale gas, while the proposed LNG terminal and a pipeline would complete its exports.

http://www.thestar.com.my/Business/B...ack/?style=biz

[craneSpotter]

^ 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/

Malaysia’s Petronas will make its final investment decision (FID) on a northwest B.C. liquefied natural gas project in June, according to Reuters.

Speaking at a press event February 27 in Kuala Lumpur, Petronas CEO Shamsul Azhar Abbas said the energy giant wanted to farm-out about 50% of its Pacific NorthWest LNG project to other companies.

“So far we have achieved 38%," he said, according to Reuters.

Abbas added state-owned Petronas is in talks with a Chinese buyer for another 10-12% of the project.