Wall sees mid-2012 for KM LNG construction start

There are still a few hurdles to clear, but Apache Canada president Tim Wall is betting construction on the KM LNG plant will start in mid-2012.

There are still a few hurdles to clear, but Apache Canada president Tim Wall is betting construction on the KM LNG plant will start in mid-2012.

And in the meantime prep work on the Beese Cove site will continue so that “we’ll be ready whenever our construction crews are ready.”

Wall was in Kitimat Thursday for an open house on the proposed liquefied natural gas plant project and visited Beese Cove prior to the event.

“It’s going to take us a while to work that site and get it right, but it was good to get started now,” he said.

While there would be a bit of blasting to do, he said that was to be expected with a site like that.

Saying work on the access road was progressing well, Wall added, “The guys are working to shore up the road and then they’ll hopefully finish off that last piece of road where the washout is.”

Wall said there were about 25-30 people working on the site that day, a lot of them locals, “and they were getting a lot done today, that’s for sure.”

While weather was obviously increasingly going to be a factor, he conceded that it would likely slow progress but said the company would still be trying to get things done even after it turns wintery.

When it was pointed out that the company was spending a lot of money on something that hadn’t even received board approval yet, Wall laughed: “We’re pretty confident, it’s a good project.”

He added he hoped to have that approval – called the final investment decision (FID) – by the first or second quarter of next year.

However, there are still a few items to get out of the way before that happens.

First, there is the front-end engineering and design (FEED) study to complete. Wall said that is going “very well” and is on track to be finished in January or February.

Then there are the contracts with Asian buyers – target markets include China, Korea and Japan – to negotiate and get signed off.

Wall said a lot of memorandums of understanding had already been reached with potential buyers.

And most importantly the company had to receive an export to licence natural gas from the National Energy Board because obviously buyers are not going to sign a contract until they see that.

“Once we get those pinned down…then we’ll be ready to go and get the boards’ approval.”

The boards in question are those of Apache, EOG Resources and Encana, the three partners in the project and its accompanying natural gas supply pipeline from Summit Lake to Kitimat.

Given the high price of LNG in Asia and the low price of natural gas here, Wall said, “It looks good and, from what we can tell from customers, the demand is definitely there.”

In fact, he believes the demand is such that KM LNG could go for expansion, what’s called ‘the second train’. (Each train would produce five million tonnes of LNG per year).

“That’s just more jobs and more investment for the area, so it’s a good story,” he said of the expansion.

On LNG export in general, Wall noted Canada had huge natural gas resources but its only customer was the Units States, “and they are, at the best of time times, volatile in the way they buy and sell.”

Pointing out LNG contracts were typically 20-year deals, he added, “You’ve got that long-term, stable export and I don’t know how Canada can lose on that.”

In the same vein, diversifying the customer base gave Canada the potential to become a major player in global LNG which would “do wonders for the economy, Canada, BC, everybody.”

While there are a number of other companies looking to export LNG from Canada to Asia, Wall says he’s not concerned.

“I think there’s enough market space for a lot of different projects here, whoever it is. We can all do well exporting LNG from Canada.”

Wall added he regarded Australia, not other Canadian exporters as his main competitor.

 

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