Copyright of the Daily Oil Bulletin 2018
Seven Generations In LNG Export Development Agreement
Seven Generations Energy Ltd. has entered into a development agreement with Vancouver’s Steelhead LNG to explore infrastructure development and open new overseas markets for Canadian natural gas.
Graphic courtesy Steelhead LNG
7G has also acquired a minority ownership interest in Steelhead LNG. This investment was funded using capital that has been designated to support 7G’s market access initiatives, which constitutes less than five per cent of 7G’s 2016 capital budget.
"Over the past few years, we have described the grossly oversupplied natural gas markets for Canadian producers and the need to seek out and develop new markets and innovative partnerships, where we can capture premium value for our large liquids-rich natural gas resources,” said Pat Carlson, 7G's chief executive officer. “Our development agreement with Steelhead LNG marks a preliminary step among a number of market expansion opportunities that we are looking to develop.
“It represents an important export initiative that envisions our two companies, plus other Canadian midstream developers, service companies, capital providers, First Nations and communities, coming together to deliver globally competitive, low-cost liquefied natural gas (LNG) and liquefied petroleum gas (LPG) into Pacific markets."
Market development through stakeholder service
"This export market development initiative marks the start of a feasibility study to determine how we can achieve long-term and sustainable success through the service of all of our seven stakeholders — those who care about the environment, governments and regulators, communities, business partners and infrastructure customers, suppliers and service providers, employees and shareholders and capital providers," said Carlson, who has joined the board of directors of Steelhead LNG.
"In keeping with our Code of Conduct, we need community members' insight, wisdom and advice during project planning. We need communities' help in finding ways to build projects, such as this Steelhead LNG development and potentially other export projects, that benefit all stakeholders. We have initiated some preliminary engagement with First Nations and community leaders. As with our core Kakwa River project near Grande Prairie, Alberta, we will add this initiative to our ongoing process of gathering guidance to better understand stakeholder interests so that they are incorporated into this initiative," added Susan Targett, 7G's senior vice-president.
Incremental and beneficial market diversification
"This agreement with Steelhead LNG is not exclusive. We are in discussions with a variety of LNG export proponents and other potential industrial, commercial and residential consumers. We believe they will generate a basket of market expansion opportunities. Each market expansion initiative represents a manageable step towards growing and diversifying markets. We believe that a series of small projects, developed in increments and in service of stakeholders along the development path, will best serve British Columbians, Albertans, Canadians, and all stakeholders," said Marty Proctor, 7G's president and chief operating officer.
Market developments require collaborative efforts of multiple contributors
Market integration that processes and transports liquids-rich natural gas and its products for Asian consumers requires midstream infrastructure, multiple natural gas sources and participant companies to finance the investment. It requires a collective effort to achieve economies of scale and manage the risk that would otherwise be associated with a larger, one-resource-supplier, one-owner project. Beyond this Steelhead LNG initiative, 7G is evaluating several other market integration initiatives that include natural gas combined-cycle electric power generation, petrochemicals derived from either of natural gas or natural gas liquids and other LNG and LPG exports opportunities. Among these opportunities, 7G believes that the largest new market potential could arise from an array of LNG export projects.
7G capital investment remains focused on developing low-supply-cost natural gas
"As Seven Generations pursues market integration initiatives, it's important to know that our core capital investment remains tightly focused on maintaining our identity as one of the lowest-cost suppliers of liquids-rich natural gas. Our intent is to use our large, low-cost natural gas resources to supply and anchor new market integration developments funded from outside sources. The lowest cost developers are generally in the best position to enter into the contracts that will be required to support market expansions that benefit all producers. By being at the forefront of these initiatives, 7G is enhancing market optionality and pursuing a first-mover advantage that we believe will reward our investors appropriately," said Chris Law, 7G's CFO.
Anchor resource for LNG development
"This arrangement with Seven Generations strengthens the resource capacity of Steelhead LNG, and fortifies our approach to aboriginal and stakeholder engagement. From the earliest days at Steelhead LNG, we have focused on meaningful engagement with the Vancouver Island communities where our potential projects are located, as well with potentially affected aboriginal groups. The Malahat Nation near Mill Bay and Huu-ay-aht First Nations at Sarita Bay have been strong partners and we will continue to collaborate with them as these projects progress. As we move forward, we also look to enhance and expand these aboriginal, business and community relationships. The low-cost, low-emissions ambitions of both companies will be improved by working with business and community members to create solid and sustainable outcomes," said Nigel Kuzemko, Steelhead LNG's CEO.
Cleaner burning Canadian natural gas to accelerate transition to lower carbon economy
Steelhead LNG and 7G believe that helping countries shift away from GHG-intensive energy sources, such as low-quality coal, will reduce global greenhouse gas emissions, which impact the whole world. This is a global priority. Already a leader in producing low-cost natural gas, 7G is investigating how it can export natural gas that has among the lowest carbon intensity of fossil fuels. Canada is well-positioned to meaningfully contribute to this objective, affirming its role as a leading global citizen. Steelhead LNG and 7G are positioning to provide low-cost delivery of cleaner-burning natural gas produced in a responsible manner.
At-Shore LNG concept
Steelhead LNG, meanwhile, said it is continuing to refine its At-Shore LNG (ASLNG) concept design, which makes use of floating LNG production and storage units moored to marine jetties. The concept will contribute to the low-impact, low-cost development of Steelhead LNG’s proposed Malahat LNG and Sarita LNG projects.
The ASLNG concept requires a limited land-based footprint at each site, significantly reducing potential local impacts and potentially allowing for remediation of existing brownfield land. A single ASLNG production and storage unit can be designed and replicated, providing scalable production capacity at Steelhead LNG’s proposed facilities and an efficient decommissioning process at the end of the facility lifespan.
The National Energy Board (NEB) has granted Steelhead LNG five licenses to export in the aggregate of up to 30 million tonnes of liquefied natural gas per year for 25 years.
Malahat LNG project
In August 2015, Steelhead LNG and the Malahat Nation announced that they had agreed to explore the proposed Malahat LNG project located on the Bamberton Industrial Lands just south of Mill Bay. The Bamberton site is a natural deep-water port with a very steep foreshore gradient, located close to international shipping lanes. The land has been used by local industry for more than 100 years, which minimizes environmental impacts.
Steelhead LNG’s engineering team and consultants are continuing to refine how the ASLNG and Malahat LNG concept design tie together, and continue to conduct robust environmental studies.
“Once we have furthered our concept design, incorporating feedback that we have received from Aboriginal groups and the community, we’ll be in a position to progress in the regulatory processes. In the meantime, we will continue consulting with potentially affected aboriginal groups, local communities and the public,” said Steelhead’s Kuzemko said.
Sarita LNG project
Steelhead LNG is continuing discussions with the Huu-ay-aht First Nations to develop another At-Shore LNG export facility at Sarita Bay at the southern end of the Alberni Inlet.
The project would be located on Huu-ay-aht First Nations owned land at Sarita Bay, about 10 kilometres north of Bamfield, and about 70 kilometres southwest of Port Alberni. The proposed Sarita LNG project is in the preliminary engineering and conceptual design stage.
In November 2014, Huu-ay-aht Aboriginal groups’ citizens voted in favour of continuing to explore the proposed project with Steelhead LNG.