NEW YORK/CALGARY (Reuters) - Energy companies announced two multibillion-dollar North American liquefied natural gas export plants on Tuesday, adding to a lengthening list of projects aimed at shipping surplus gas overseas to take advantage of more lucrative markets.
Excelerate Energy, the U.S. liquefied natural gas company founded by Oklahoma billionaire George Kaiser, plans to develop the country’s first floating LNG export plant off the Gulf Coast, while Royal Dutch Shell has partnered with Asian buyers to build a plant in western Canada.
The two projects add to 10 others in various stages of development in North America over the last few years as a huge supply surge from shale deposits floods the market and pushes prices far below levels in Europe and Asia.
The export of LNG, which is natural gas cooled to a liquid for shipping, marks a stark turnaround for North American energy companies, which 10 years ago were scrambling to build import terminals before shale gas production unlocked decades of supplies.
It has sparked a political debate in the United States over whether cheap resources would be better used domestically. The Obama administration said on Monday that it does not oppose U.S. LNG exports, though it will depend on an official analysis to guide its decision on whether to allow more gas projects to proceed.
But Canada, whose vast gas reserves in British Columbia are stranded without demand from the amply-supplied United States, is racing to find needy buyers in Asia willing to pay dearly for the fuel. British Columbia Premier Christy Clark has identified LNG exports as a major economic opportunity and job creator in Canada’s westernmost province.
“Canada is a lot more open to exports than the United States. The U.S. market is bigger and there is more potential for that gas to serve domestic needs - more than in British Columbia,” said John Malone, analyst at Global Hunter Securities in New York.
Shell, along with PetroChina, South Korea’s Kogas and Mitsubishi Corp, will study a liquefaction plant at Kitimat, British Columbia, that would initially include two units with capacity of 6 million metric tons (1 metric ton = 1.1023 tons) annually each, or a total of 2 billion cubic feet a day.
It could be in service by the end of the decade, pending regulatory approvals. Called LNG Canada, it is the third major plant to be announced on the West Coast port in recent years, following Kitimat LNG, led by Apache Corp, and BC LNG Export Co-operative, both of which have export licenses.
Others are in the study stage at Kitimat, which looks set to become a major supply hub for the Pacific Rim.
In the United States, only Cheniere Energy’s Sabine Pass project has full export approval.
Lorraine Mitchelmore, president of Shell’s Canadian division, said it is unlikely that the rush to build LNG plants on the West Coast will mean a saturated market, with Asian economies, the world’s fastest growing, as the target markets.
Meanwhile, fast-advancing shale gas recovery technology can unlock gas reserves in Western Canada of as much as 200 trillion cubic feet, Mitchelmore said. British Columbia’s supply sources include the massive Horn River and Montney shale gas formations.
“So we see an incredible demand and a very competitive supply here in western Canada, so we see a huge opportunity to supply this competitive gas,” she told Reuters.
LNG Canada will negotiate with a third party to build and own a pipeline to connect the supply to the plant, she said.
LNG prices in Asia are at four-year highs of about $18 per million British thermal units (mmBtu), while U.S. benchmark prices languish around $2.50 mmBtu, weighed down by oversupply.
”Given where the Canadian gas reserves are, especially Horn River, they are unlikely to make any money in the U.S. gas
Excelerate’s Lavaca Bay LNG project off Texas, expected to start exporting by 2017, would initially have the capacity to ship 3 million to 4 million metric tons per year (mtpa) of LNG, or 0.4-0.5 billion cubic feet per day of gas, Excelerate said in a statement. It could be expanded to 8 mtpa, or about 1 percent of daily U.S. supply.
The relatively small size of the floating liquefaction project, compared to an onshore site, could speed up construction, which is expected to take just 44 months, according to Excelerate. Most LNG projects take at least four years to build.
Editing by Bob Burgdorfer and David Gregorio