LNG Exports: The Newest Economic Engine, Or A Fad That Will Pass?

By Richard Nemec | April 2012, Vol. 239 No. 4

Transporting more than 75% of all the gas that moves in western Canada, TransCanada is viewed as being in an extremely good position to be able to provide access to supply and transmission services to the liquefaction facilities being proposed in British Columbia. It has firm contracts to move most of the emerging gas production from the Horn River, Montney and Cordova plays, Cunha says.

TransCanada also operates Gas Transmission Northwest (GTN) between Canada and the California border, and runs the U.S. part of the North Baja Pipeline connecting with Sempra’s Costa Azul facility with southwest shippers at the California-Arizona border and the LNG facility near Ensenada, Mexico.

“We are continuing to expand our western Canadian gas gathering and transmission system to ensure that gas production from the entire basin is connected to markets,” says Cunha, adding that during the past five years, TransCanada has spent about $2 billion on expansions and extensions, and he forecasts that sort of growth to continue.

What he calls a “tolling methodology” used in the TransCanada system makes it possible for any western Canadian basin gas production to access any and all LNG supply lines, regardless of the production’s location, Cunha says.

If the West Coast project(s) move ahead, the cost of building adequate transmission pipeline capacity will depend on how much overall gas capacity is being exported, but in any event, connecting western Canada production areas to the British Columbia coast will be “multibillion-dollar” undertakings, Cunha says.

TransCanada stresses its historic infrastructure role, and downplays any possible leap into an equity position in one or more of the proposed export projects. Nevertheless, one of the newest proposals in Oregon – Jordan Cove – is strategically positioned for accessing the GTN pipeline, bringing both Canadian and U.S. Rockies supplies to the coastal plant’s connecting transmission line.

“Our main interest continues to be supplying natural gas pipeline infrastructure for these export projects,” Cunha says.

Jordan Cove project backers announced last fall that they would seek to make their proposed LNG facility and its 1.2 Bcf/d connecting transmission pipeline a dual export-import project, which means the pipeline flow would have to be reversible.

"Yes, we made the decision to pursue the development of a dual-use LNG facility based upon the strong indications of interest from prospective terminal capacity holders," Jordan Cove’s Braddock told news media at the time. "While we have not reached any firm agreements for the terminal capacity, we feel strongly these commitments can be reached within the next few months [first quarter 2012]."

In November, Braddock said Jordan Cove was now "cautiously proceeding" with "the critical steps necessary to secure all of the approvals and consents" needed to construct and operate Jordan Cove in dual-use configuration. He anticipated that to be a two-year process.

Like Jordan Cove, the related 234-mile, 36-inch Pacific Connector Pipeline Project has FERC approval, but it is working its way through various state and federal land-use and environmental permitting processes that will take at least another 12-15 months, according to Braddock. The switch to an export location won't change much for the consortium pipeline, he says.