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• PIPELINE NEWS NORTH
SEPTEMBER 28, 2012
industry news
NEW PLAYERS IN THE LNG GAME
BG and Spectra join forces on gas export project james waterman Pipeline News North
Spectra Energy is the latest company bidding to join the liquefied natural gas (LNG) export game in British Columbia. The midstream outfit announced on September 10 that they are working with international natural gas heavyweight BG Group to develop a system to transport natural gas from northeast B.C. to a proposed LNG export hub in Prince Rupert. If it goes forward, the equal ownership venture would see Spectra take responsibility for construction and operation of the pipeline, while BG Group would contract the natural gas for transport. “That was a very easy decision,” said Steve Sawffield, acting president of BG Group in B.C., explaining why his company has chosen to work with Spectra. “Spectra have a great North American footprint,” he added. “And their position in western Canada is unsurpassed. They’ve had over 50 years of experience in the midstream. And it was a logical fit with them.” Spectra had similar praise for BG Group. “We’ve got to know them pretty well now over the last year or so that we’ve worked with them,” said Doug Bloom, president of Spectra Energy Transmission West. “And I have to say that we really like working with them. “They’re a big player, obviously. They’re a global player. A very significant LNG player and a very significant natural gas company that operates in 25 countries around the world. So, they bring a lot to the table.” That includes access to an Asian market coveted by natural gas producers in western Canada. “They’re a very significant player,” Bloom continued. “We’ve been impressed, frankly, at how well they’ve done their homework in British Columbia,” he said. “They’ve done a lot of work on the pipeline side themselves to try and make sure they were really knowledgeable as they went into the process of selecting with whom they’d work. So, they’re thorough and they’re a big player and so far we’ve found the cultures very compatible between us. So, we’re looking forward to working with them for the long term.” The plan involves constructing an 850-kilometre pipeline beginning at point in the Cypress area, just over 100 kilometres northwest of Fort St. John. The pipeline will likely follow the Fort Nelson Mainline right-of-way south to a compressor station near Chetwynd, then turn west toward Prince Rupert along a brand new pipeline corridor. “Capacity is targeted at 4.2 billion cubic feet (bcf) a day,” said Bloom, adding that the current plan is for a 48-inch diameter pipe.
At this point, capital cost of the project is estimated at between $6 billion and $8 billion, but that number isn’t yet set in stone. “This is very much feasibility,” said Swaffield. “We’re in the early stages of the project. We wouldn’t be making a final investment decision until the middle of the decade. And the first gas exports would be right at the end of the decade.” “We have been working for about a year as a team and announced previously that we’ve selected Ridley Island as our potential export location,” he continued. “And that’s a site that benefits from road and rail access. And its coastal location and deepwater port is what we were looking for on the coast of B.C.” “We’ve got plenty of work to do to confirm the corridor or adjust it as needed,” said Bloom. “Go through all the permitting and regulatory process, work with the First Nations who are affected along the way, and then, of course, do substantially more technical work – engineering and technical analysis – that can give us a more firm estimate of the cost, all of which we plan to do in the next couple of years until we get to our final investment decision date.” BG Group is presently discussing the project with natural gas producers in northeast B.C. that may wish to take advantage of this avenue to export their product. “It’s probably gas that we and others would process,” said Bloom. “We think it’s going to create a lot of opportunity for a company like ours that is a very large gas processor up in northeastern B.C. That’s not to say that we would get all of it, but we think it does create a big opportunity for players like us in gathering and processing the gas. And even the pipeline connections into the system that we are planning to build with BG.” Spectra likely had a leg up on the competition for this opportunity to work with BG Group thanks to past experience in the challenging terrain of northwest B.C. “We owned all the voting shares of PNG (Pacific Northern Gas) and we used to do a lot of the engineering work for them,” said Bloom. “And, in fact, engineers that worked at one time for Spectra designed and built that PNG system. So, throughout the company there’s a reasonable amount of institutional memory about PNG and what aspects of the geography we really need to pay attention to out there. And to avoid areas that are unstable either because of slope or water flow.” Bloom believes that history played a significant role in BG Group’s decision. “I think they really understand that, because we’ve owned and operated pipelines in British Columbia for 55 years, we’ve built up a fair bit of experience with the geography,” he continued.
Spectra Energy has entered into a development agreement with BG Group to build an 850-kilometre pipeline for transporting as much as 4.2 billion cubic feet of natural gas per day from northeast British Columbia to a proposed liquefied natural gas export hub at Prince Rupert.
photO COURTESY OF spectra energy
“We cross all of the mountain ranges already. We’ve done a lot of work up in that northwest part of British Columbia that again leverages off the experience we’ve had everywhere else in British Columbia. So, I think all of that probably played an important factor. “We’ve got a pretty good reputation in the communities that we operate in,” he added. “And we work very hard to be a good neighbour and to be part of the fabric of the communities that we deal with. I think all of those things were relevant to BG as they were deciding who
to work with.” Spectra’s knowledge of the challenges of building and operating a pipeline in northwest B.C. may inspire some new ideas this time around. “One of the most important things we’re focused on is altitude,” said Bloom, noting that it is preferable to stay below about 600 metres above sea level rather than venture into areas well over 1000 metres above sea level. “Altitude is going to create weather issues, is going to create access issues, is going to create hazards that could