Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Liquefied natural gas pipeline


The growing rush to export Canada's natural gas bounty to energy-hungry Asian markets has drawn another player to the northwestern shores of British Columbia.

Three months after a group of major western companies applied for the first domestic natural gas export licence, a partnership named BC LNG Export Co-operative LLC has asked the National Energy Board for approval to build a second export terminal in Kitimat, B.C.

The application comes as the Canadian oil patch manoeuvres to find better profits for the many trillions of cubic feet of gas it has uncovered in northeastern B.C. Those moves are also playing out against an expected surge in demand for natural gas, especially among Asian consumers that increasingly see it as a plentiful source of clean energy - and a promising alternative to nuclear power. The nuclear industry worldwide is facing new questions about safety due to the disaster in Japan.

Story continues below advertisement

A second consortium now actively developing an LNG project is another confirmation of the potential the industry sees in shipping Canadian gas to Asia.

"Given all the unconventional gas that's likely to be developed in North America, you're looking at a pretty depressed gas sales price scenario in the B.C., Alberta area," said Tom Taitham, the managing director of BC LNG. "Asian markets are completely different. They're used to paying oil-equivalent prices which are much, much higher than we're used to here in North America."

The math works like this: Western Canadian gas currently fetches roughly $3.65 per million BTU. BC LNG estimates that it can pipe gas to the coast for 75 cents, liquefy it for $3 and ship it across the Pacific for $1 or less. Add up the costs, and Mr. Taitham believes gas can be delivered for less than $8.50 to Asia - where right now in Japan and South Korea, for example, it sells for roughly $11.

"If we were doing business today, that spread would be allocated back and shared amongst the buyers of the LNG and the sellers of the gas," Mr. Taitham said.

And the spread could broaden in the future, analysts believe, as growing overseas demand creates an increasingly tight LNG market.

The BC LNG proposal uses unproven technology and is being promoted by a partnership between the Haisla First Nation and a family-owned Texas company. LNG export terminals have also proven controversial around the world, stoking safety and environmental concerns - although, ironically, in British Columbia, where Greenpeace was born, they have provoked far less concern than plans to export oil through coastal waters. In fact, B.C. first nations have largely supported gas exports.

And BC LNG's plans have raised some eyebrows, given how different it is from other projects. BC LNG wants to build a modest facility when the rest of the industry has tended toward huge plants in a bid to achieve efficiencies of scale.

Story continues below advertisement

Take Kitimat LNG, for example, a partnership between Apache Canada Ltd., Encana Corp. and EOG Resources Canada Inc. that hopes to make a construction decision later this year. It is working toward a $4.7-billion export terminal capable of processing 700 million cubic feet of gas a day. By contrast, BC LNG is applying to build a 125-million-cubic-feet-a-day terminal that would cost between $360-million and $450-million.

But while the small size is far cheaper - and could be built faster, perhaps as soon as 2013 - it could also pose difficulties in negotiating with overseas buyers who tend to prefer long-term contracts with established sellers.

"Does it provide the LNG buyers with the security of supply that they're looking for? That is the real question," said Rosemary Boulton, the former chief executive of Kitimat LNG.

The BC LNG model is far different from what Kitimat LNG has proposed. Instead of being owned by companies with major gas reserves, it would consist of an operating company that would liquefy gas, at a fee, for members of an export co-operative. Those members would include B.C. gas sellers and Asian buyers. Under the current structure of the co-operative, companies can buy in at a rate of $50,000 a year. Or they can receive free membership if they provide letters to the National Energy Board expressing intent to buy or sell gas through the terminal.

"Half a dozen producer members have indicated they want to participate and so have four LNG off-takers," Mr. Taitham said.

Mr. Taitham is also managing director with LNG Partners LLC, the family-owned Houston business that is the project's financial backer. The family made its money in building offshore Gulf Coast pipelines through Leviathan Gas Pipeline Partners LP, which was sold to El Paso Natural Gas Co. for $450-million (U.S.) in 1998.

Story continues below advertisement

The idea for BC LNG has been around since 2008, but financing problems led to the project nearly being scuttled, after one of its key assets - an agreement to obtain capacity on existing natural gas pipelines - was handed to someone else. The company now says it has recovered that capacity, which will spare it the cost of building expensive new pipelines through B.C.'s mountains. However, its agreement, which expires in June if it is not renewed, gives it access to just 80 million cubic feet a day. That's a third less than the capacity it envisages.

Still, the company is laying plans to build its liquefaction plant on a barge, float it to Kitimat and then ground it on shore. It would use two LNG ships. Loading one would take the better part of a month; in that time, the other could make the three-week return transit to Asian markets. Using ships in that fashion would save BC LNG from having to build substantial LNG storage in an environmentally sensitive area.

Although the project would use existing liquefaction machinery, the entire barge-built idea is novel.

"This thing should be fun to get it off," Mr. Taitham said. "There's really nothing that's ever been done like this in the LNG industry."

Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies