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KITIMAT, B.C. — In a climate of growing hostility toward energy industry development across North America, Timothy Wall, president of the Canadian unit of Houston-based Apache Corp., took the road less travelled to the heart of Kitimat.
He flew multiple times to the 9,000-resident town on the northern British Columbia coast to ensure support for his liquefied natural gas plans. He unleashed a team to explain the challenges and the benefits.
He won over the local aboriginals, the Haisla Nation, by meeting with them, acknowledging their rights, making them his landlords. “We had a big push … trying to make this a win-win for everybody,” Mr. Wall, who is originally from Houston, said in an interview.
“We told the stakeholders in the Kitimat area that there would be challenges, but that we would work through them. That with everybody pulling in the right way, we would get there.”
The two-year effort paid off with widespread community support for Apache’s plan to pipe natural gas from fields at the other end of the Rockies, build a terminal down the canal in Bish Cove to liquefy it, and transport it by tanker to Asia.
All this at a time the same community was giving another major project, the Northern Gateway oil sands pipeline, a rough ride.
In the past year, several global companies jumped in with similar plans to export LNG to Asia from the Kitimat area, the end point of Douglas Channel, a waterway so wide and so deep it’s ideally suited for navigation by large tankers.
If the plans take off, they would rotate the focus of the beleaguered natural gas industry in Western Canada to the Asian market, breaking its historic integration with the United States. In the process, Kitimat would morph into a Fort McMurray on the coast.
Combined, the plants could liquefy some seven billion cubic feet a day of gas, perhaps more, from Western Canadian such fields as the Horn River, the Montney and the Cordova, potentially putting a pin to the glut of supplies from shale discoveries that are depressing prices.
“I think it’s got really good legs,” said Ed Kallio, director of gas consulting at Ziff Energy Group in Calgary. “We can’t see a reason not to do it. It’s all in the timing now. There is a window to tie up this market and they don’t want to miss the window.”
The window opened wide last year, when the March earthquake, tsunami and nuclear meltdown in Japan triggered a search across Asia for safer energy.
Canada’s immense natural gas supplies and its West Coast, which is closer to Pacific Rim markets than other global LNG export hubs, got lots of attention.
But whether it remains open, or slams shut, depends on how quickly the integrated business is built.
Competition for the same customers is fierce. Across the Pacific, Australia is roaring ahead with plans for eight LNG mega projects at a combined cost of US$200-billion.
In Alaska, holders of vast, stranded reserves in the North Slope are talking about liquefying their gas for export to Pacific markets rather than piping it south on the long-delayed Alaska gas pipeline. Just down the coast in Oregon, the U.S. department of Energy has just granted an export permit to a proposed LNG terminal in Coos Bay.
China is sitting on its own mother lode of shale gas.
So far, the Western Canadian option is proceeding at top speed, with five and potentially six projects either announced or in the study phase. They are being advanced by some of the major players active in Australia, where a building frenzy has pushed up costs.
For the rest of this column, please go to the National Post/Financial Post website: http://business.financialpost.com/2012/01/28/the-race-to-china/?__lsa=0e0f3d58