Proposed West Coast BC LNG Terminals

[jawagord]

Next month the Chairman of Petronas will address employees, maybe some good news for BC's Northwest LNG, although "commitment" doesn't necessarily mean full speed ahead in these energy markets.

Besides having to make tough decisions to reduce costs, moves that impact the livelihoods of the thousands of employees, contract staff, agents, contractors and other business associates of the oil giant, Wan Zul had also inherited two massive projects which had been entered into by Petronas when the price of oil was above US$100 a barrel. These are the Refinery and Petrochemicals Integrated Development (Rapid) project in Pengerang, Johor and the US$36bil (RM137bil) Petronas-led Pacific NorthWest LNG project in Canada.
Sources say that at the coming town hall address, Wan Zul will reaffirm Petronas’ commitment to both projects. This would not be a surprising move, considering that Petronas has been indicating its support for these projects throughout this oil crisis. Petronas has indicated that there is wisdom in such a move as the renegotiation of contracts in the current climate can lead to a lower cost of build up of these projects. Petronas could then reap the benefits of that when the price of oil recovers.
About a month ago, Wan Zul wrote a note to all employees of Petronas, noting among other things that the company needed to undertake another round of cost cutting and a change in business model.

[Stingray2004]

I tweeted that info, from the Malaysian Star, one week ago - last Friday. Just corroborates other info.

Has always been a "done deal". Fed enviro CEAA certification by late March/early April... and then shovels in the ground. Basically the conclusion by all parties "in the know".

99.9 percent. About time.

[jawagord]

Originally Posted by Stingray2004

I tweeted that info, from the Malaysian Star, one week ago - last Friday. Just corroborates other info.

Has always been a "done deal". Fed enviro CEAA certification by late March/early April... and then shovels in the ground. Basically the conclusion by all parties "in the know".

99.9 percent. About time.

The only shovel that might go in the ground this year is the silver one Christy Clark will use when she does her pre-election photo op in the fall or winter. Before that happens the Environment Minister has to perform Justin's green house gas assessment on the project and additional consultations with native groups to get "social license" for the project, that's gotta add 6 months to the process. Get all that done then it's two years of detailed design and procurement before any serious work gets done on the plant site other than brushing and leveling off topsoil for core samples and maybe setting up a construction office/work camp nearby. That assuming Petronas doesn't further stretch the project schedule out to manage it's cash flow problems, a year of "value engineering" might be in order after the detailed design cost estimate comes in.

http://classroomedition.ca/ottawa-to...-lng-terminal/

[Stingray2004]

It's quite obvious that ya are waaaayyyy outta the loop and both BC and LNG "illiterate" regarding the nascent LNG industry here in BC.

Likely 'cause ya reside in Calgary, which is quite far from both the LNG proponents and their BC operations (both head offices as well as upstream NE BC).

In any event... just a synopsis... back in June, 2015 the Petronas consortium issued FID subject to 2 conditions - receipt of PDA (granted in July, 2015) and fed CEAA enviro certification.

Anyone in the energy industry is fully cognizant that a proponent does not issue FID on a huge $36 billion capex unless FEED as well as EPCC have been satisfactorily completed... among other factors. Apparently ya don't. Both were commenced back circa 2013.

The fed CEAA enviro certification has dragged on and on to the frustration of the proponents. To put things into perspective, the BCEAO granted enviro certification back in the fall of 2014.

That's all a moot point now as the fed CEAA confirmed a few weeks back that the proponent will have low impact upon fisheries at Flora Bank.

That CEAA assessment also addressed GHG emissions, which also apparently is just political "window-dressing".

And the 5 local Tsimishian FN chiefs were satisfied with that CEAA outcome, which corroborated their own internal enviro assessment in terms of fisheries - the key enviro factor therein.

The CEAA has already issued their preliminary report with draft conditions for the proponent. When the 30-day public comment period ends on March 11... the federal minister is expected to grant final CEAA enviro certification by late March/early April.

In that vein. just a few weeks back, the BC preem (along with the BC enviro minister, LNG minister et al) led a 100-strong contingent to Ottawa, which included Petronas officials, Royal Dutch Shell officials, First Nations chiefs from the Tsimishian, Haisla et al First Nations as well as union leaders from the BC Building Trades unions.

They met with the PM as well as the fed ministers of environment, energy et al. They all came away quite confident in final approval for the Petronas LNG facility, etc.

Finally, in order to corroborate my previous post.... PNW LNG (Petronas consortium) prez Andy Calitz stated recently... "We were shovel ready back in June, 2015 and we are shovel ready today".

No doubt. As they have already sunk in excess of $17 billion into the project and for good reason.

[WarrenC12]

You have some pretty rose coloured glasses on. LNG in BC is dead until the price comes back. AltaGAS officially cancelled their project today.

[MalcolmTucker]

^ And that is one that should have had the lowest cost per unit produced.

[libtard]

Originally Posted by Stingray2004

It's quite obvious that ya are waaaayyyy outta the loop and both BC and LNG "illiterate" regarding the nascent LNG industry here in BC.

Likely 'cause ya reside in Calgary, which is quite far from both the LNG proponents and their BC operations (both head offices as well as upstream NE BC).

In any event... just a synopsis... back in June, 2015 the Petronas consortium issued FID subject to 2 conditions - receipt of PDA (granted in July, 2015) and fed CEAA enviro certification.

Anyone in the energy industry is fully cognizant that a proponent does not issue FID on a huge $36 billion capex unless FEED as well as EPCC have been satisfactorily completed... among other factors. Apparently ya don't. Both were commenced back circa 2013.

The fed CEAA enviro certification has dragged on and on to the frustration of the proponents. To put things into perspective, the BCEAO granted enviro certification back in the fall of 2014.

That's all a moot point now as the fed CEAA confirmed a few weeks back that the proponent will have low impact upon fisheries at Flora Bank.

That CEAA assessment also addressed GHG emissions, which also apparently is just political "window-dressing".

And the 5 local Tsimishian FN chiefs were satisfied with that CEAA outcome, which corroborated their own internal enviro assessment in terms of fisheries - the key enviro factor therein.

The CEAA has already issued their preliminary report with draft conditions for the proponent. When the 30-day public comment period ends on March 11... the federal minister is expected to grant final CEAA enviro certification by late March/early April.

In that vein. just a few weeks back, the BC preem (along with the BC enviro minister, LNG minister et al) led a 100-strong contingent to Ottawa, which included Petronas officials, Royal Dutch Shell officials, First Nations chiefs from the Tsimishian, Haisla et al First Nations as well as union leaders from the BC Building Trades unions.

They met with the PM as well as the fed ministers of environment, energy et al. They all came away quite confident in final approval for the Petronas LNG facility, etc.

Finally, in order to corroborate my previous post.... PNW LNG (Petronas consortium) prez Andy Calitz stated recently... "We were shovel ready back in June, 2015 and we are shovel ready today".

No doubt. As they have already sunk in excess of $17 billion into the project and for good reason.

You're completely out to lunch.

[MalcolmTucker]

Unless you have a firm buyer, projects are going no where. You can't even cover operating costs for liquefaction at the Japanese landed price right now.

And no one is going to lend for projects that are based on locked in prices that are substantially higher than the world price - just too much rick of purchasers walking away. At the very least Shell can move its big LNG ships to difference jurisdictions in response to market shifts. You can't move this project.

[ssiguy]

I think LNG will eventually go ahead but certainly not for several years. The economics just aren't there. Prices are a shadow of their former selves and even if they rise somewhat {which of course they eventually will} there is still a huge glut on the market and far too much capacity for current demand. There are also other projects in the world far further along in development than BC's so as demand slowly rises they will quickly fill the void.

Prices are far too low right now and this is made much worse by the current problems in oil. Not only has oil fallen fast but has devastated bottom lines to where natural resource companies are bleeding red ink and have very few funds for any further developments until oil prices rise again. This has also effected many of the world's largest banks {including Canadian ones} which are undercapitalized and facing many near term write-offs due to smaller natural resource companies closing and the banks having to write-off their losses.

[WarrenC12]

There is a huge glut of fossil fuel supply right now. Coal mines and power plants are closing, and oil is dirt cheap. LNG could be seen as a "clean" alternative if countries get behind the Paris deal, but a rise in prices is years away. Of course the major players will want to keep their foot in the door with sweetheart tax deals and all, but the first ship full of LNG from NW BC is probably at least a decade away.

Maybe there will be a pipeline proposal south instead. Who knows.

[Stingray2004]

Originally Posted by WarrenC12

You have some pretty rose coloured glasses on. LNG in BC is dead until the price comes back. AltaGAS officially cancelled their project today.

The global LNG biz is a very (and I mean VERY) complex matter - likely 99.9% of folk don't understand same.

To wit, you are inferring LNG "spot prices" I assume? Not really relevant for the global LNG majors as their LNG facilities are typically 80% - 90% contracted out and JCC-linked.

And then you have various LNG biz models:

1. Fully integrated (natural gas supply/dedicated pipeline/terminal) model, whose ownership is also primarily comprised of "off-takers". In terms of BC that in includes:

The Petronas consortium as well as the Royal Dutch Shell consortium. For example, Petronas either utilizes the NG internally or utilizes same for other selling commitments while the rest of the partners are "off-takers". The current LNG "spot price" as well as the JCC-linked price is not really relevant to these guys. Furthermore, they are looking at a 40-year life cycle for the 2021 - 2061 time frame.

2. Fully integrated model, whose current ownership is comprised primarily of "sellers". In terms of BC, that includes:

Chevron/Woodside, ExxonMobil/Imperial Oil, and CNOOC/Inpex.

3. Tolling model, whereby an LNG facility purchases NG at the local hub (AECO Hub/Henry Hub) and charges a $1.50+ liquefaction fee to "off-take" counter-party, which also is required to provide LNG tanker for "pick-up". In BC, that includes the Alta Gas proposal, as well as about 15/20 of the other BC LNG proposals. Considerable drawbacks therein.


BTW, the statements in my previous post are all factually correct. I will re-iterate that with all of the facts at hand, I have a 99% confidence level that within the next 60-days (after final CEAA enviro certification is granted by late March/early April), shovels will be in the ground on the project. I have no doubt in that regard. At all.

To further corroborate my position, in mid-December the CEO of Petronas held a press conference in Kuala Lumpur and brought up the topic of the PNW LNG facility confirming:

1. That their conditional FID (of June, 2015) is awaiting final CEAA enviro certification "within next few months" and that they are confident that will receive same as it is their final hurdle;

2. That they are fully committed to the project;

3. That they have apparently been frustrated at the delays in receipt of CEAA certification;

4. That they will proceed with construction upon receipt of same and (after ~5-year build-out) they will begin LNG production in 2021. (which is also the year when analysts expect that global LNG markets "will re-balance itself".


• Video Link

PS. I have also a 99% confidence level as well that the Royal Dutch Shell consortium will proceed with FID toward the end of this year. Why? Similar reasons to Petronas and:

1. Last year, Royal Dutch Shell global CEO van Beurden categorically stated that the LNG Canada project was their highest global LNG priority;

2. Internally, LNG Canada has run their numbers and the "fundamentals are really sound"... and "remain positive when compared to competing LNG projects in areas like the Gulf of Mexico and Africa and Australia";

3. The Shell consortium was anticipated to make FID by June, 2016 but has deferred same to late, 2016 in order to integrate the recently acquired BG Group. Frankly, the BG Group does have some "dog" LNG assets;

4. And finally, with a 40-year export license recently granted by the NEB to the consortium, they are required to commence production by 2021/2022 or the licence will be revoked. With a December, 2016 FID and 5+ year build-out... fits in nicely time-wise for a 2021-2022 completion date.

But that's it for now. 15/20 LNG proposals in BC are just backed by promoters and will likely never see the light of day. The others - ExxonMobil/Imperial Oil, Chevron/Woodside, and CNNOC (Nexen)/Inpex will likely issue FIDs in the 2018 - 2020 time frame with initial production in the mid-2020 time-frame. But that's still years away.

[Stingray2004]

Originally Posted by MalcolmTucker

^ And that is one that should have had the lowest cost per unit produced.

One would think that with:

1. FLNG (floating platform is apparently more cost effective);

2. An already dedicated small-diameter pipeline to the north west coast owned by AltaGas;

3. Purchase of gas from AECO Hub (prices now not only slightly cheaper than Henry Hub on a per unit basis but also in cheaper Canadian $);

That said, AltaGas stated that they required $10 MMBtu to make the project viable. Doesn't make sense with all of the foregoing.

And they couldn't land any "off-take" agreements.

Remember, the AltaGas proposal is similar to the "tolling" LNG model on the U.S. Gulf Coast - production facility purchases NG at Henry Hub prices, charges $1.50+ liquefaction fee, etc. to purchaser, and purchaser must also arrange for pick-up by chartering LNG tanker.

A lot of the off-take agreements on U.S. Gulf Coast LNG are not by actual "end-users" but by arbitrage seekers and many are getting burnt right now. Many actual purchasers want "security of supply long-term", etc. and this biz model doesn't provide that for 'em.

In any event, AltaGas is also involved with LPG (not to be confused with LNG) in terms of constructing a $500 million facility in NW BC with its Japanese partner Idemitsu for what is an apparent lucrative niche market in Asia.

[sunsetmountainland]

Originally Posted by libtard

You're completely out to lunch.

Actually of all the people on this subject in this thread I would say Stingray seems to know what he is talking about.

I am interested to understand your points with regards to this statement. What facts of interest do you have to prove Stingray wrong and why?

[MalcolmTucker]

Originally Posted by Stingray2004

One would think that with:

1. FLNG (floating platform is apparently more cost effective);

2. An already dedicated small-diameter pipeline to the north west coast owned by AltaGas;

3. Purchase of gas from AECO Hub (prices now not only slightly cheaper than Henry Hub on a per unit basis but also in cheaper Canadian $);

That said, AltaGas stated that they required $10 MMBtu to make the project viable. Doesn't make sense with all of the foregoing.

And they couldn't land any "off-take" agreements.

Remember, the AltaGas proposal is similar to the "tolling" LNG model on the U.S. Gulf Coast - production facility purchases NG at Henry Hub prices, charges $1.50+ liquefaction fee, etc. to purchaser, and purchaser must also arrange for pick-up by chartering LNG tanker.

A lot of the off-take agreements on U.S. Gulf Coast LNG are not by actual "end-users" but by arbitrage seekers and many are getting burnt right now. Many actual purchasers want "security of supply long-term", etc. and this biz model doesn't provide that for 'em.

In any event, AltaGas is also involved with LPG (not to be confused with LNG) in terms of constructing a $500 million facility in NW BC with its Japanese partner Idemitsu for what is an apparent lucrative niche market in Asia.

Ahh. I had assumed Idemitsu was going to offtake and use the cargos to squeeze price concessions out of their larger suppliers/ fill surge capacity that would be harder to contract in periods of constraint. That they were a merchant makes total sense - just like the upgraders that were cancelled in Alberta once the bitumen crack spread disappeared.

Which is surprising because Idemitsu could have locked in the entire supply from Douglas Channel for one of its LNG power plants — a back of the envelope conversion (which may have one of the conversion factors wrong, it is late on a Sunday night and I didn't triple check between the myriad of units used) has Douglas Channel producing enough gas to supply a baseload 400 MW power plant, or a peaking plant a couple times larger.

[WarrenC12]

Originally Posted by Stingray2004

The global LNG biz is a very (and I mean VERY) complex matter - likely 99.9% of folk don't understand same.

Thank goodness we have you here to educate us.

[WarrenC12]

Originally Posted by sunsetmountainland

Actually of all the people on this subject in this thread I would say Stingray seems to know what he is talking about.

I am interested to understand your points with regards to this statement. What facts of interest do you have to prove Stingray wrong and why?

He's obviously done some research on the matter, but completely bullish on LNG (and other things on our Vancouver boards). He speaks with 100% authority but really the things he talks about are hunches and hopes. Kind of reminds me of Donald Trump.

[Metro-One]

I feel the truth is inbetween the two views on here.

Stingray does seem to have some more detailed information than others on here, but he is probably too positive.

On the flip side, many of the more negative viewpoints on this subject come from a few forum members that are known for trashing a little on BC and seem to be often hoping for BC economics to fail.

Cutting it down the middle, I dont think BC LNG is dead, but i dont expect all these projects to go through full steam ahead. But, I would not be surprised if a couple of the more solid projects do continue some form of forward momentum.

[Stingray2004]

Originally Posted by WarrenC12

He's obviously done some research on the matter, but completely bullish on LNG (and other things on our Vancouver boards). He speaks with 100% authority but really the things he talks about are hunches and hopes. Kind of reminds me of Donald Trump.

Haha!

Interesting to note that just one hour ago the Malaysian Star newspaper confirmed today that the CEO of Petronas stated (after a press conference today involving a briefing on financial results ending December, 31, 2015) that they are "fully committed" and "pushing ahead" with the PNW LNG project along with a petro-chemical project elsewhere on the globe.

Straight from the proverbial horse's mouth - and that's the highest coin in the realm.

He also stated a reduction and delay in both capex as well as opex in several other named global projects as well as internally. Won't affect the PNW LNG project though.

Ya know somethin'? Back in 2011, Petronas acquired a 50% or $1 billion interest in one of Progress Energy's nat gas fields in NE BC. At the time it raised my eyebrows as I was fully aware of Petronas and their likely modus operandi in making that investment as they were likely the highest profile LNG producer in Asia.

Then later in April, 2012, in an obscure Globe and Mail article, the then CEO of Petronas was quoted that they were gonna make a "take-over offer of a Canadian natural gas company". Now that really raised my eyebrows and my first thought was - "loose lips sinks ships".

Again, I knew right away that the takeover target would be Progress Energy for a plethora of reasons. Funny thing though - PE stock didn't move on the TSX as a result. Conducted some more due diligence and subsequently myself and some buds purchased a $7 figure interest in Progress Energy stock on a very educated "hunch".

Lo and behold about two months later Petronas made a take-over offer of Progress Energy at a premium. We then dumped our stock and made a 80%+ premium. "Twas a great payday!

Ya may take the foregoing with a grain of salt - no skin off my back.

And ya kinda remind me of Al Bundy.

[Stingray2004]

Originally Posted by MalcolmTucker

Ahh. I had assumed Idemitsu was going to offtake and use the cargos to squeeze price concessions out of their larger suppliers/ fill surge capacity that would be harder to contract in periods of constraint. That they were a merchant makes total sense - just like the upgraders that were cancelled in Alberta once the bitumen crack spread disappeared.

Which is surprising because Idemitsu could have locked in the entire supply from Douglas Channel for one of its LNG power plants — a back of the envelope conversion (which may have one of the conversion factors wrong, it is late on a Sunday night and I didn't triple check between the myriad of units used) has Douglas Channel producing enough gas to supply a baseload 400 MW power plant, or a peaking plant a couple times larger.

The AltaGas/Idemitsu partnership first came across my radar roughly 2 years ago... and they were looking at exporting LPG (propane, butane, etc.) to Asia back then. Apparently, LPG is part of Idemitsu's core biz in Japan.

They subsequently purchased an existing LPG export biz in the U.S., just across the border here, in Ferndale, WA.

At the time, I guess they were also looking at exporting LNG as well with their Triton LNG proposal in NW BC... which is still languishing and I doubt will go anywhere for a plethora of reasons.

And then over a year ago, they purchased the interests of the proponent in the proposed Douglas Channel LNG in NW BC (which was then insolvent/bankrupt). At 500,000 MT/annum, was a very small proposal.

Late last year, Japanese trading house Mitsui was kicking the tires of Douglas Channel LNG as they were/apparently still are looking at taking an equity/off-take interest in a "tolling" LNG biz model off the BC coast. Guess nothing materialized there and the Douglas Channel LNG proposal has now been shelved.

As for Idemitsu, I don't believe that they are involved in nat-gas electrical power generation in Japan (or elsewhere):

http://www.idemitsu.com/company/profile/index.html

That said, they are also actively looking at constructing an LPG facility in Prince Rupert and they have relatively recently selected a site on Ridley Island (where coal port is also situate). They would take advantage of the excess supply of propane/butane in NE BC/Alberta, ship same by tanker train along the northern CN mainline, and have deep water access at Ridley Island.

I suspect that they will proceed with same since their Ferndale, WA facility is apparently profitable.

[MalcolmTucker]

Japanese style news release: