AltaGas inches closer to final decision on LNG project in Kitimat

The proponent for a $500 million liquefied natural gas (LNG) export facility is inching closer to making a final investment decision, which could come later this year. 

The proposed project is headed by the Douglas Channel LNG Consortium, a partnership led by AltaGas Ltd, a midstream company known in the Peace as the operator of the Younger Natural Gas Liquids Extraction Plant in Taylor and the Bear Mountain Wind Park in Dawson Creek.

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AltaGas applied to the National Energy Board (NEB) June 1 on behalf of the partnership for a licence to export LNG near Kitimat, British Columbia.

The export licence, if approved, will last for a term of 25 years beginning on the date of the first LNG export.

The NEB originally granted the export licence to BC LNG Co-operative LLC in February 2012, but it was revoked after that company dissolved in January 2015.

Douglas Channel LNG partners include Japan's Idemitsu Joint Venture Limited Partnership, Belgium-based EXMAR NV and EDF Trading Limited, a subsidiary of Electricite de France S.A.

The proposed LNG export project involves two phases.

The first would see the construction of a floating liquefaction facility with the capacity to receive 110 million cubic feet of gas per day. The second will include more floating liquefaction facilities that would increase export capacity to one billion cubic feet per day.

The company intends to make a final investment decision on the first phase by the end of 2015 and begin deliveries of LNG in 2018.

“It is estimated that trillions of cubic feet of natural gas exist in the Montney Shale gas play located in Northwest Alberta and Northeast British Columbia,” a statement on the company's website said. “There is a growing need for gas processing capacity and pipelines as drilling activity increases in the area. AltaGas plans to meet this need by delivering gas processing and natural gas liquids extraction services to our customers.”

Because the export licence had been previously approved, it is likely another license will be granted by the NEB.

Gas for the first phase of the project will be transported from the Western Canadian Sedimentary Basin in Northwest Alberta and Northeast B.C. via the existing Pacific Northern Gas Ltd. (PNG) pipeline system, which runs from Summit Lake to Prince Rupert, with lateral transmission pipelines extending to Kitimat.

The second phase of the project will require an expansion of the PNG pipeline system.

PNG has engaged with the B.C. Environmental Assessment Office on the proposed PNG Looping Project, which would upgrade its gas transmission capacity by twinning the existing pipeline.

Subject to regulatory environmental project approvals, construction of the PNG Looping project could commence as early as later this year, with an earliest in-service date in late 2016.

AltaGas holds a long-term lease agreement with the Haisla Nation on District Lot 99, which is located about eight kilometres west of Kitimat, B.C.

The licence will expire 10 years after the date it is granted if gas exports have not begun.

“The project is well positioned to be an early exporter of LNG off the West Coast of Canada, with unique competitive advantages,” said John Rittenhouse, EDF Trading executive in a February press release.

The Douglas Channel LNG partnership's two-phased export facility is one of 21 projects that propose liquefying Canadian natural gas and shipping it to Asia.

AltaGas has also proposed British Columbia’s first natural gas liquefaction facility for Dawson Creek, which will be for local consumption.

Douglas Channel LNG is one of three proponents expected to make final investment decisions this year. However the others — Pacific NorthWest LNG and Woodfibre LNG — are facing turbulence.

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