By KELLY CRYDERMAN
CALGARY -- The Oregon coast could play a key role in helping
to get Western Canada's vast natural gas reserves out of the
ground and on to ships destined for Asian countries that need
At least two companies, Oregon LNG and Veresen Inc., are
proposing to build liquefied natural gas terminals in Oregon
for which Canadian natural gas would be the primary supply
source. It's not likely to be the silver bullet for Western
Canada's struggling gas business, but it illustrates that
Canada and the US won't always be competitors in the North
America wide push to kick start the nascent LNG industry.
The proposed Oregon projects could open a new door for
Canadian natural gas producers that would otherwise have to
rely on proposed projects based out of Kitimat or Prince Rupert
to tap overseas export markets.
Oregon LNG CEO Peter Hansen argues the Oregon option will be
a boon to Canada's "economically stranded" small and medium
sized natural gas producers, which are not likely to have the
capacity to be significant players in major companies' LNG projects.
"It does create a reasonable outlet for small and medium
sized producers," Mr. Hansen said of his proposed terminal on
the Skipanon Peninsula in Warrenton, Oregon.
"Canada can produce so much gas that no matter how many LNG
plants are built, there will be more than enough gas for them.
We will be an outlet for some gas that otherwise simply
wouldn't have a market."
Western Canadian natural gas prices remain in the doldrums,
and many producers are struggling to remain viable.
Canadian producers desperately want to get into Asian
markets to expand their customer base and take advantage of
higher prices across the Pacific. Asian nations want access to
North American gas, which they believe can lower their energy
But building LNG facilities to export natural gas is
expensive, time consuming and risky in a global energy market
prone to quick seismic shifts. When Mr. Hansen originally
envisioned his project in 2004, it was based on the
premise that North America was facing a shortage of gas and the
facility was originally meant to be an import terminal. But new
fracking techniques have brought massive new supplies of US
shale gas online, and have transformed the Unites States into a
country searching for natural gas export markets.
Oregon, like the British Columbia coast, has the advantage
of being a relatively short shipping distance to key Asian
ports in China and Japan, and Mr. Hansen now views his planned
C$6 billion terminal as "just another British Columbia coast
project." Although the project near the mouth of the Columbia
River faces regulatory hurdles and environmental concerns, Mr. Hansen
is looking to secure an export licence by the end of the year.
He is also trying to find equity partners from Canada, the
United States and Asia.
"We believe that it's beneficial to have partners from both
the supply and the consuming end," said Mr. Hansen, who was a
speaker at a Calgary LNG conference last week.
Both Oregon LNG and Veresen, which is betting on its Jordan
Cove LNG project, are each looking at export capacities of 9
MMtpy. Both terminals will be smaller than many planned
Canadian projects, but they won't be insignificant. Apache
Corp. and Chevron Canada Ltd.'s proposed Kitimat LNG terminal
would ship up to 10 MMtpy, if built. LNG Canada, a planned
joint venture than includes Shell Canada Ltd., Korea Gas,
Mitsubishi and PetroChina Co. would export 24 MMtpy.
Tom Valentine, a senior partner with Norton Rose Fulbright
in Calgary, said the Oregon LNG project has a number of
benefits, including an easier passage from harbor out to sea
than proposed LNG terminal locations in Kitimat.
"That Oregon project, and/or that Jordan Cove project, will give Canadian
producers a new avenue into Asian markets. But that in and of
itself is probably not going to give us the impact that
Canadian producers are looking for," Mr. Valentine said,
adding, "it's one means of many."
Dow Jones Newswires