The National Energy Board last week approved a long-term liquefied natural gas export licence for the KM LNG project.
And in doing so the project cleared one of three hurdles it needed to in order to get the full go-ahead.
KM LNG – a 40:30:30 partnership between Apache Canada, EOG Resources Canada and Encana – required that licence to be able to nail down contracts with potential Asian buyers in China, Japan and Korea.
In an interview last month with Black Press Apache CEO Tim Wall said a lot of memorandums of understanding had already been reached with potential buyers.
The third item is completion of the front-end engineering and design (FEED) study which Wall said was going “very well” and was on track to be finished in January or February.
“Once we get those pinned down…then we’ll be ready to go and get the boards’ approval,” he added.
The licence allows KM LNG to export 200 million tonnes of LNG over a 20-year period, or a maximum (plus or minus 10 per cent) of 10 million tonnes per year.
That is the planned total production of both phases of the project which the company has to date indicated would be built in increments of five million tonnes.
One of the issues the three-member NEB panel considered was whether there was enough natural gas supply to meet the proposed LNG export numbers.
The three partners showed that between them they had established reserves of 15.7 trillion cu.ft. (tcf) of gas, far in excess of the 10.2 tcf export commitment.
On the demand side, “While the board notes the existence of competing sources of global LNG, given the size of Canada’s natural gas resource, proximity to markets in Asia and Canada’s stable political and regulatory environment, the board is of the view that KM LNG has the opportunity to compete in the global LNG market.”
Another factor the board had to assess was the impact of exports on Canadian domestic natural gas markets “to determine whether Canadians are likely to have difficulty in meeting their energy requirements at fair market prices.”
It concluded Canadians would not face such difficulties, noting “the proposed export volume is relatively small compared to overall North American supply.”
And it would continue to monitor the situation to ensure Canadian needs continued to be met at “fair market prices”.
On environmental issues, the board decided duplication on its part of the federal and provincial legislation and processes (e.g. environmental assessments) was not warranted.
By Malcolm Baxter
Kitimat / Black Press