Tag Archives: Korea Gas Corp.

Shell applies for 25-year natural gas export licence

(Source: Globe & Mail) Royal Dutch Shell plc and its three Asian partners have applied to export an enormous volume of natural gas from the British Columbia coast, as global attention begins to focus on the movement of Canadian energy to Japan, China and other markets.

On Friday, Shell said it had applied to the National Energy Board for a licence to export up to 24-million tonnes per year of natural gas. That is equivalent to 3.4-billion cubic feet per day, fully a quarter of Canada’s entire output in 2011.

Shell, which has partnered with Korea Gas Corp., Mitsubishi Corp. and PetroChina on an export terminal slated for Kitimat, B.C., is asking for approval to export gas for 25 years.

The partners intend to build their initial terminal to half the capacity they are requesting, “with an option to expand the project to a total of four units or 24 million tonnes,” spokesman David Williams said in a statement.

“The application is an important milestone in the regulatory process and assures that there are sufficient natural gas reserves in Canada to meet domestic needs and exports.”

Outside of export possibilities, Canada’s natural gas industry faces tremendous challenges. The discovery of large new supplies of natural gas in the U.S. have raised concerns that Canadian gas will, over the course of the next decade, no longer be needed south of the border.

At the same time, northeastern British Columbia has proven to possess enormous gas reserves. In June, for example, Apache Corp. said it had drilled a well in the province’s far northern Liard play that was the most prolific shale gas test in the world. Apache is leading a separate project to build an LNG export terminal in Kitimat.

Shell has declined to estimate the cost of its terminal. On Friday, however, TransCanada Corp. chief executive Russ Girling pegged it at $12-billion, plus a $4-billion pipeline to deliver gas from the B.C. northeast.

Natural gas exports offer the possibility of selling gas into international markets, where gas prices are linked to oil prices, and are much higher as a result.

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Canada’s Natural gas production is under threat if it can’t find new markets

This past Tuesday, Shell Canada declared an official launch to a liquefied natural gas (“LNG”) terminal project in Kitimat, B.C. The multi-billion-dollar plant would load and esimtated 1.2 billion cubic feet per day onto LNG tankers. The project partnership, gives shell a 40 per cent interest, and 20 per cent each to Korea Gas Corp., Mitsubishi Corp., and PetroChina Co. Ltd.

With the increased production in the US and the US becoming an exporter of natural gas, it is critical for Canada to find an alternative market for Canadian natuarl gas. The only way to do this is through export via a LNG export facility.

One potential problem is that Kitimat LNG is primarily owned by American companies where other interests and politics could come into play and its corporate backers (Apache Corp. EOG Reources etc) have delayed an investment decision that was expected for early this year. An Asian backed LNG project may have a better chance of success given the huge and growing demand for natural gas in Asia. Having your customers finance the facility and participate in the ownership has a different set of motivating factors to influence the investment decision.

The take-away here is that Canada is at a critical juncture in saving their natural gas industry, and growing it by tapping into the global LNG distribution network. Certainly a point highlighed by Shell Canada president Lorraine Mitchelmore who referred to not openting up Asian markets “We are at risk. You have to find a market for this product.”

Hopefully, Kitimat LNG, and Shell’s project are not too late. Shell is leading their partnership project and intends to start front-end engineering and design on the terminal in 2013. A final investment decision could come in 2015, with construction complete by the end of the decade.

Related articles:

Globe & Mail: Shell urges quick action to secure LNG markets for Kitimat terminal

Globe & Mail: PetroChina takes stake in Shell gas field in B.C.

Shell partners with majors for floating LNG project for BC

Royal Dutch Shell is in exclusive talks with a consortium of Asian firms to examine the feasibility of a floating LNG facility for the coast of BC. The consortium includes China National Petroleum, Korea Gas Corp., and Mitsubishi Corp. all of which have other investments in BC’s vast shale gas assets.

See Calgary Herald: Shell identifies Asian partners for LNG facility http://bit.ly/kFQu1j

Korea Gas to invest $1.1 billion in BC shale gas

Korea Gas Corp. (“Kogas”) and EnCana Corp. will jointly explore and develop three natural gas with Kogas looking to invest $1.1 billion over the next five years to extract over 1 trillion cubic feet of natural gas from land leases held by EnCana in northeastern BC’s lucrative Horn River Basin and Montney Basin.

The initial agreement is a three-year farm-in deal with  EnCana where Korgas will invest $565-million to acquire a  50%  interest about 10,000 hectares in the Horn River Basin, and roughly 52,000 hectares in the Montney.

The investment is another step towards B.C. becoming a major export hub of natural gas and Kogas’ second major investment into B.C. gas.

South Korea consumed ~1.2 trillion cubic feet (“Tcf”) of natural gas last year – far below the 443 million cubic feet it produces – making it heavily dependent on imported liquefied natural gas (“LNG”). As a result, Korgas is the world’s single largest buyer LNG in the world and currently operates three LNG import terminals and has plans to build two more. To say the least, natural gas is key to meeting Korea’s – and Asia’s – energy requirements. Korgas’ investment brings further international attention to the huge potential that the Horn River Basin represents. In October, another South Korean energy company, Korea National Oil Corp., acquired Calgary-based Harvest Energy Trust for $4.1 billion.

Kogas’ interest in BC’s Horn River Basin may really started back last June, when Kogas committed $20 billion to Kitimat LNG – a planned LNG export facility located in Kitmat, BC. (See HRN Kitimat LNG signs deal with Korea Gas Corp. worth $20 billion). According to the terms of the agreement, Kogas will acquire ~40% of Kitimat LNG’s production, or two million tonnes per year for 20 years with an option to acquire an equity stake in the terminal. The first natural gas to be shipped from Kitimat LNG is expected in 2014 and with the EnCana deal, Kogas will become both an exporter and importer of natural gas.

Apache Corp. acquired a 51% stake in Kitimat LNG in DATE. Apache holds major gas assets in the Horn River Basin and elsewhere. By investing in Kitimat LNG, Apache ensures an alternative customer to the U.S. for their Horn River natural gas.

Bill Gwozd, vice-president of Calgary consulting company Ziff Group is quoted:

“You’ll probably see more companies looking to invest in Canadian natural gas.  The value chain proposition is increased by owning the resources.”

With low natural gas prices, industry players are taking advantage of lower valuations to invest in expanding their holdings and invest both upstream and downstream in the distribution. The reasons are simple. They foresee a bright future for natural gas as a low carbon energy source that is fast becoming a global commodity that can be shipped internationally and will no longer be limited to pipeline distribution.

Globe & Mail: South Korean firm joins EnCana in B.C. gas

Apache Corp. signs supply deal with Kitimat LNG

ApacheCorp_logoKitimat LNG continues to build momentum for their Liquefied Natural Gas (“LNG”) terminal to be built in Kitimat, British Columbia, announcing it has signed a memorandum of understanding (“MOU”) with Houston-based Apache Corp. (NYSE:APA). Apache will  supply between 200 million and 300 million cubic feet of natural gas per day to the Kitimat facility from the Apache’s Horn River projects. Apache holds about 210,000 net acres in Horn River where individual horizontal wells in there could recover as much as 10 billion cubic feet of natural gas. Like previously announced MOUs,  Apache will have an option to purchase an equity stake in the facility.

The Kitimat LNG facility will open new markets in Asia and other international markets for British Columbia’s booming natural gas industry and is a direct result of the fundamental shift in North America’s energy mix brought about by shale gas discoveries across North America including the Horn River basin.

Apache Corp. is the second major supplier to enter into a deal with Kitimat LNG. Last month, another Houston-based gas producer, EOG Resources Inc., signed a similar MOU. Earlier in the year, Kitimat signed MOUs with Korea Gas Corp. and Spain´s Gas Natural to buy the LNG that will be produced from the Kitimat plant.

Kitimat has received federal and provincial regulatory approval. Startup is expected to take place some time in the fourth quarter of 2013 with an initial planned capacity of 700 million cubic feet per day.

Wall Street Journal: Apache to Fuel Asia’s Gas Demand

Press Release: Kitimat LNG Inks MOU with Apache Corporation

Kitimat LNG and EOG sign natural gas supply agreement

 

Artist rendering of Kitimat LNG Inc.'s processing plant

Artist rendering of Kitimat LNG Inc.'s processing plant

Kitimat LNG announced it has signed a memorandum of understanding (“MOU”) with Texas-based EOG Resources Inc. (NYSE:EOG), whereby EOG will supply natural gas from the Horn River basin to Kitimat LNG’s planned liquid natural gas facility in Kitimat, British Columbia.

Rosemary Boulton, President of Kitimat LNG stated:

“EOG’s participation in our project reinforces the fact that business and natural gas fundamentals support our LNG terminal. Kitimat LNG presents a compelling opportunity for producers to leverage growing natural gas reserves in western Canada and sell into significant new international markets such as Asia.”

This announcement follows two previous announced MOUs Korea Gas Corp. (HRN: Kitmat LNG signs MOU with Korea Gas Corp worth $20 billion) and Spain’s Gas Natural (HRN: Kitimat LNG signs MOU with Spain’s Gas Natural) to purchase LNG from Kitima LNG’s facility over the next ten years.

The Kitmat LNG facility is the critical link to opening new  international markets for the Horn River basin and the western Canadian gas industry as a whole. EOG is an early major into the Horn River basin which  has an estimated 250 trillion cubic feet of natural gas locked in the shale rock formation.

The Canadian Press: EOG, Kitimat LNG reach agreement on proposed liquefied natural gas project

Kitimat LNG signs MOU with Spain’s Gas Natural

logo_gas naturalKitimat LNG announced it has entered into a Memorandum of Understanding (“MOU”) with Spain’s Gas Natural (GAS.MC). Under the terms of the agreement, Gas Natural will acquire 30% of Kitimat’s output from their planned Liquid Natural Gas facility located in Kitimat, BC and provides Gas Natural an option to acquire and equity stake in the terminal.

The MOU will will see Gas Natural acquire up to 1.6 million tonnes of LNG a year from the Kitimat LNG facility for 20 years and is the second major supply agreement announced by Kitimat LNG in the last month. In early June Kitimat LNG signed a similar MOU with Korea Gas Corp (“KoGas”) to acquire 2 million tonnes of LNG a year from the terminal for 20 years. KoGas als has an option to acquire an equity stake in the terminal.

Originally planned as an import terminal until recent discoveries and technologies allowed extraction of massive amounts of shale gas in the Horn River basin and Montney basin in northeast British Columbia. Massive infrastructure investments from the BC Provincial government, Encana Corp, TransCanada and others will connect Kitimat with these massive natural gas reserves. Kitimat LNG will be a export terminal to sell natural gas to the international market – including KorGas and Gas Natural. Initial export capacity will be 3.5 million to 5 million tonnes of LNG per year.

Gas Natural supplies natural gas to 11 million customers in Spain, France, Italy and Latin America, and has a generating arm producing electricity in Spain, Mexico and Puerto Rico. It is also in a joint venture with Repsol (REP.MC) which operates a fleet of LNG carriers.

Reuters: Spain’s Gas Natural may take stake in Canadian LNG

Kitimat LNG signs deal with Korea Gas Corp. worth $20 billion

Artist rendering of Kitimat LNG Inc.'s proposed processing plant

Artist rendering of Kitimat LNG Inc.'s proposed processing plant

British Columbia’s abundance of shale gas in the Horn River and Montney basin is one small step closer to reaching customers in Asia.

Kitimat LNG Inc., signed up another customer by entering a memorandum of understanding with Korea Gas Corp. (“KOGAS”) the world’s largest importer of liquified natural gas (“LNG”). According to the terms of the agreement, Korea Gas will acquire up to 40% of Kitimat LNG’s production, or two million tonnes per year for 20 years with an option to acquire an equity stake in the terminal. The total purchase value over that period would be more than US$20 billion.

Earlier in the year, Mitsubishi Corp., entered a a non-binding agreement with Kitimat LNG whereby Mitsubishi would buy 1.5 million tonnes a year of terminal capacity and acquire a minority equity interest in the terminal.

The Kitimat LNG terminal would expand British Columbia’s natural gas market from the  Horn River and Montney basin to customers in Asia including Korea, Japan and China.