​Consortium of Alberta natural gas producers developing own LNG project

Greg Kist is CEO of Rockies LNG Partners. Image: CP Images

This article is part of the Fall 2019 Alberta Oil & Gas Quarterly. Click here for your complimentary copy.

A group of nine mid-sized Alberta natural gas producers have formed a coalition to advance an LNG project on Canada’s West Coast. The companies compete for land and opportunities, but recognize that they need to work together to get an export project off the ground, says Greg Kist, CEO of the consortium, called Rockies LNG Partners.

Why does it make sense for producers to work together to develop LNG opportunities?

When you look at having to build a large-scale pipeline out to the West Coast and a large-scale facility, you need size and scale in terms of supply. The current producer group produces about 3 billion cubic feet per day, so they’ve got a very large, long-term supply base that can be very attractive to LNG buyers.

That’s why it’s important for producers to work together, whereas for a single mid-cap producer in Western Canada it would be extremely difficult for them to do anything even remotely like this on their own. One of the things that we’re looking at is bringing in partners in both the pipeline and for the terminal itself; players that are obviously more infrastructure-type parties.

Does the consortium plan to revive a mothballed LNG project?

We’re not trying to resurrect an old project, but what we’re trying to do is to make sure that we don’t lose the benefits of things that have already happened.

I would use as an example that the two pipelines that we’re considering out to the West Coast already have environmental certificates and have done a certain amount of the permitting: that being TC Energy’s Prince Rupert Gas Transmission Pipeline and Enbridge’s West Coast Connector Pipeline.

What impact does the new federal environmental review process under Bill C-69 have on the consortium’s plans?

It’s hard to know obviously because it is so new, but we’ve had a chance to begin to assess what the requirements of the new regulations are and I think we certainly see a path through that.

There’s certainly a series of unknowns, but that’s also why we would say at this stage that we don’t want to stray far from the existing approved pipelines.

As far as the terminal goes, it’s yet to be seen whether it would ultimately be under a federal regulatory process or whether it would be under a provincial regulatory process, so that’s to be assessed, but I think both for British Columbia and for federal regulations, we’ve had a chance to have a look at them and we think we have a path to navigate through that.

It will certainly be intense, as regulatory processes should be as it relates to the environment, but certainly we have better visibility now than say six months ago.

What is the current status of the consortium’s efforts?

We’re working very hard to determine if there are customers that are prepared to work with us to try to advance a project. We have several very interested parties in terms of being the buyers of the LNG ultimately.

We’re really targeting coming on-stream some time later in the 2026-type timeframe, so if you kind of work everything back from there you kind of need to get kicked off in the first phases of any new regulatory process arguably in the next six months.

We’ve already done a significant amount of work: we’ve completed a Class 4 engineering estimate; we’ve been working very hard with the pipeline companies to determine what the best opportunity is; we’ve already done a significant amount of work on project descriptions so that we’re ready to go once we’ve ultimately selected the site; and our engagement with Indigenous nations has been ongoing from the very start.

In fact, the very first thing that I did when I joined the group is I let the group know that I wasn’t interested in trying to find a site as much as I was interested in speaking with the Indigenous nations to see what is the most appropriate site from their perspective, so we’re in the throws of trying to nail that down.

Rockies LNG Partners: The view from Marty Proctor, CEO, Seven Generations Energy
Why is Seven Generations involved in Rockies LNG Partners, and how do you expect to benefit from LNG access?

Egress has been core to our strategy and as we evolved our understanding of how prolific the Montney resource was, we felt that it was imperative to ensure adequate takeaway capacity out of the basin. This approach has created meaningful options for transporting our natural gas into key consumer markets and has driven significantly higher realizations for our gas prices compared to local AECO pricing.

As we think about egress into the next decade, we see LNG being a key outlet for natural gas in the WCSB that will help diversify consumer markets and ultimately bring domestic prices closer in line with global natural gas prices. Given the importance of LNG, we feel the best opportunity to participate is to partner with like-minded producers to aggregate meaningful volumes.

We expect LNG access will support higher prices for the basin, or prices that are more closely linked to global natural gas prices. Ultimately sales prices will be based on the market clearing price, less transportation and shipping and the liquefaction/re-gasification tolls.

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