LNG

The Canada Energy Regulator (CER) said it had approved an application from Chevron Corp. for a 40-year licence to export natural gas from the proposed Kitimat LNG project on the Pacific Coast of British Columbia despite environmental opposition.

The British Columbia Oil and Gas Commission has just highlighted the massive volumes of shale gas reserves to underpin LNG export projects in the Canadian province with the Montney Shale alone having 1,965 trillion cubic feet of gas-in-place unconventional resources.

The LNG Canada project led by Royal Dutch Shell will initially produce 14 million tonnes per annum of LNG and has an option to increase its capacity to 28 MTPA.

The Shell project includes a US$5-billion pipeline of 670 kilometres being developed by TransCanada Corp. to bring the feed-gas from the Montney in northeast BC to the Pacific Coast.

Feed-gas for Chevron’s Kitimat plant will come from the large upstream shale-gas resources in the 322,000 net acres it has in the Horn River and Liard Basins, also in northeast BC.

Chevron will then transport the gas on the proposed Pacific Trail Pipeline to the liquefaction plant site at Bish Cove, also near Kitimat.

While the BC Commission put the Montney Shale resources in place at around 1,965 Tcf, for the project being developed by Chevron in partnership with Woodside of Australia will use some of the Liard Shale’s 848 Tcf and the Horn River Shale’s 448 Tcf.

The northern natural gas basins account for nine of 10 new wells in the province and currently account for 4.9 billion cubic feet per day, or 77 percent, of BC's output.

“The 42 Tcf of Montney gas booked as market-ready reserves since horizontal drilling and hydraulic fracturing arrived to enable development in 2005 are only 2 percent of the resources, “ said the Commission in its 40-page report.

In the last five years natural gas production has increased by 23 percent resulting in increased loads within the existing pipeline delivery points for the Montney, Horn River and Liard basins.

Most of the gas within these regions is transported by pipelines by Enbridge and TransCanada.

“In 2005, the onset of Montney horizontal drilling with hydraulic stimulation created a new supply of gas. This was followed by Horn River development in 2010. Further development of the Horn River basin has now ceased, awaiting economic gas demand,” stated the Commission.

Chevron has recently revived its almost dormant LNG project originally proposed with Apache Corp. for Bish Cove near Kitimat by applying to regulators for export capacity of up to 18 MTPA.

The prolific Montney formation covers 130,000 square kilometres at various depths of BC and the neighbouring province of Alberta.

The provinces split the geology evenly by area, but BC has about 60 percent of the gas estimated to figure in the Montney marketable reserve forecast, or 271 Tcf of the formation’s total 449 Tcf of marketable gas.

The Commission listed the leading BC Montney shale developers and they include participants in the LNG Canada project, Shell and Petronas of Malaysia.

Other asset holders are Encana Corp., ARC Resources, Tourmaline Oil, Painted Pony Energy, Murphy Oil Corp., Canadian Natural Resources Ltd., Canbriam Energy and Crew Energy.

Shell and its Asian partners, also including PetroChina, Japan's Mitsubishi and Korea Gas Corp. have started work at the brownfield site near Kitimat, a former energy products terminal acquired by Shell in 2011 when the delayed Chevron project had already cleared its Bish Cove site to be ready for construction.