Lower natural gas rates possible in northwestern B.C.

Smaller LNG project would help pay for gas line costs

THE PROSPECT of lower natural gas prices for residential and commercial users in the northwest inched closer last week with the takeover of a failed small liquefied natural gas (LNG) project at Kitimat.

AltaGas Ltd. of Calgary announced it has assembled a consortium which now controls the proposed Douglas Channel LNG project which had been in bankruptcy protection after its original owners ran out of money several years ago.

That project would liquefy natural gas on a barge for export using gas supplied by the existing Pacific Northern Gas (PNG) pipeline which serves the northwest.

PNG is owned by AltaGas and is that company’s key portion of the revived Douglas Channel project.

The PNG line at one time supplied gas to two pulp mills, one at Prince Rupert and one at Kitimat, and a methanol plant at Kitimat, all of which have since been closed and dismantled.

The result has been higher delivery costs for PNG’s northwest residential and commercial customers because those large industries had paid a majority of the costs of maintaining the line.

But should Douglas Channel LNG proceed, delivery payments to PNG will ease those higher residential and commercial customer costs.

“The project provides natural gas producers in Western Canada a new market for their products,” said AltaGas president David Harris in a Jan. 28 release.

“PNG customers who live and work in northwestern B.C. can expect to benefit from lower natural gas rates.”

PNG now charges northwest residential customers a natural gas delivery rate of $11.867 a gigajoule, just over three times more than what its Fort St. John customers pay for delivery, $3.64 a gigajoule.

PNG is a delivery utility and is not permitted to add on extra charges to the gas it purchases for its customers.

Northwestern residential customers also pay a higher basic monthly charge, $10.75 compared to $7 in Fort St. John.

The new Douglas Channel LNG owners say a final investment decision is expected by the end of this year and if that decision is reached, a two-year construction and preparation period will follow leading to exports beginning in 2018.

The plan is to export 550,000 tonnes a year of LNG, making the project on the smaller end of the production scale with other potential LNG developers in the region planning for projects of in excess of 10 million tonnes a year.

With a projected start date of 2018, based on a final investment decision this year, Douglas Channel LNG stands to be the first LNG export facility in B.C.

Its cost is projected to be $600 million, $100 million of which would come from AltaGas.

In addition to AltaGas, the Douglas Channel LNG consortium includes Japanese energy marketer Idemitsu Kosan Co., Ltd. with one-third ownership, along with EDF Trading Ltd., a subsidiary and wholesale market operator of Electricite de France S.A., and Belgium-based liquefied natural gas shipper EXMAR NV.

The project’s land-based facilities would be built on land owned by the Haisla Nation and Douglas Channel LNG now has long term land and water leases with the Haisla, said Harris.

The Haisla had been partners with the previous incarnation of Douglas Channel LNG.

AltaGas and Indemitsu are also partners in another potential LNG project called Triton LNG which would also be barge-based and could be located at Kitimat or Prince Rupert.

This project has an LNG export licence from the federal government and would use gas supplied through an additional PNG pipeline of 24 inches in a diameter that would run parallel to its existing pipeline of 10 inches in diameter.