Blog: US OKs new competitor for B.C. LNG

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We keep a watchful eye on potential competition for overseas sales from our B.C. LNG plants.

We usually look south for this — but now we should look northwards as well, because a proposed project in Alaska could match our “natural advantages” in LNG exports.

South of us, the U.S. has seven active LNG-for-export plants, three more under construction, and another 15 at various stages in planning or approvals processes.

The major locations for U.S. plants are on the Gulf of Mexico. These days, they are overwhelmingly focused on shipping LNG to Europe. (Which includes some Canadian natural gas processed into LNG by the U.S.)

The Gulf Coast plants are still sending some shipments to Asia, and may begin later this year to send more, but in those they will eventually have to compete with our natural advantages.

Those B.C. advantages:

  • Our plants will be only 10-12 days sailing for an LNG carrier to reach Asian buyers. From the Gulf Coast, though, it’s 20-24 days, meaning more money spent on the vessel and the voyage, and more emissions.
  • Gulf Coast producers face hefty costs for moving an LNG carrier through the Panama Canal to reach Asian markets. Canal fees now run more than US$500,000 for a loaded Asia-bound carrier and more than US$420,000 for a carrier returning empty.
  • We don’t have to pay those extra days of sailing time, or those canal fees.
  • And because of our cooler climate, our production costs in chilling natural gas will be a little lower than theirs.

But all the advantages we have listed for B.C. face a potential threat — from a proposed US$39-billion LNG-for-export plant in Alaska.

Right now, that plant at Nikiski, near Anchorage, and a 1,290-km gas pipeline to feed it, are still proposals on paper, from the state-owned Alaska Gasline Development Corporation.

But the U.S. Department of Energy gave the project a green light last week for exports, following a 10-year environmental permitting process.

The U.S. Federal Energy Regulation Commission and the State of Alaska had already given go-aheads to build and operate the facilities.

The LNG, they say, would be exported mainly to countries in Asia, in competition with Russia. But that means also with us.

And one of the first things the developers noted is that the Alaska plant would be only 7-9 days shipping time away from Asian markets.

The proponents hope it will be operational by 2030 if they get investment money and all required permits. That’s a much faster schedule than anyone in Canada has been able to execute.

The Nikiski plant would produce 20 million tonnes of LNG a year, compared with 14 million from Phase One of LNG Canada, which hopes to be in production in mid-2025.

(Woodfibre LNG would turn out 2.1 million tonnes a year. The Haisla Nation’s Cedar LNG would produce three million tonnes and the Nisga’a Nations Ksi Lisims project 12 million.)

All Things LNG reports:

  • Northern Alaska has some 35 trillion cubic feet of proven resources and potential for another 200 trillion. (The Montney gas formation extending from northeast B.C. into Alberta is estimated to contain 400 trillion cubic feet of recoverable, sales-quality gas.)
  • Located at Prudhoe Bay, the Alaska gas treatment plant will process 3.9 billion cubic feet of gas per day, removing impurities before it’s piped south to the liquefaction facility;
  • An 800-mile pipeline will transport gas from Alaska’s North Slope to Nikiski, following a well-established corridor on state and federal lands;
  • The Nikiski facility will have three LNG trains (production lines) and two storage tanks;
  • Some of the LNG would be used in Alaska, and “the project promises job creation, revenue generation, and energy security for Alaska.”

Still on paper, true, but a competitor to watch out for.

And to cap it all, there might even be a little future competition for B.C. from Mexico. That country plans eight LNG plants, and four of them would be on Mexico’s west coast.

Our governments need to take all this into account: The harder they make it for Canadian LNG development and exports, the easier they make it for the competition.

(Posted here 20 April 2023)

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