Australian Company Breathes New Life Into Bear Head LNG; Project Revived As Export Proposal

Bear Head LNG is being revived by an Australian company, which is planning to export gas from the proposed project site in Nova Scotia — previously intended as an import terminal that was shelved over seven years ago.

Liquefied Natural Gas Limited, an Australian company, is purchasing Bear Head LNG Corporation from Anadarko Petroleum Corporation for US$11 million. (For a presentation about the proposed project, tap or click here).

“We’re acquiring 100 per cent of the project rights associated with the site, and importantly as well, the other key assets that go with it,” Maurice Brand, LNGL’s managing director and CEO, said during a Sunday evening conference call to discuss the acquisition.

The proposed Bear Head regasification terminal was shelved by Anadarko back in 2007 (DOB, Feb. 8, 2007). Anadarko took a $111-million charge on the project. The company had been struggling for some time to find supply for the terminal, a key component of a regasification terminal’s viability.

LNGL, meanwhile, said it has developed a gas supply plan and a transportation plan and has interest from several parties to enter into tolling agreements. Bear Head LNG plans to be viable at relatively low gas supply volumes of roughly 300 mmcf per day — two million tonnes per annum (mtpa) — which allows the project to start then grow with further gas supply. The initial total capacity will be four mtpa, with potential for future expansion.

LNGL stated that the site near Point Tupper is the shortest shipping distance to Europe compared to other North American sites. Gas supply to Bear Head requires the construction of a gas transmission pipeline off the Maritimes & Northeast Pipeline to deliver gas from Goldboro to the Bear Head LNG terminal site.

“In terms of financing, we have announced … a placement,” Brand said. “Those funds that will be raised will cover the acquisition.

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“[It] will also cover the development part of this project through to final investment decision late next year/early the following year,” he added. “Most of the costs going forward will not be related to permitting, it’ll basically be the FEED.”

In terms of the ownership structure, while LNGL will retain 100 per cent of the project through FID, “it would be foolish of me to say that would be the case post-FID because there will be a number of factors that will drive that,” Brand said.

The project’s assets include a 255-acre (land and water) industrial‐zoned site in Richmond County, N.S., with all project rights, approvals, LNG tank foundations and significant civil works.

The company will use the development, technical and engineering work already completed for the Magnolia LNG project — an export facility LNGL is developing in the United States — and integrate with the Bear Head project’s existing civil works and detailed engineering work.

Bear Head will have significantly lower development costs, the company stated, and likely a faster approvals schedule than Magnolia due to work already completed.

“The Bear Head project has excellent LNG export opportunities to European markets,” the company stated.

Its Magnolia LNG project in the U.S. Gulf Coast remains on schedule and on budget at US$2.2 billion and will not be affected by the Bear Head acquisition.

This acquisition, which is subject to standard closing conditions and consents, is in line with LNGL’s strategy of acquiring sites in North America where it can replicate its Magnolia LNG project and fast-track development by using its existing LNGL development team and its Optimized Single Mixed Refrigerant (OSMR) technology.

LNG Limited’s OSMR process has the following main features, which contribute to its higher efficiency, the company said:

  • Aeroderivative gas turbines and efficient compressors;
  • Combined heat and power (CHP) plant that minimizes plant fuel gas use;
  • Steam-driven ammonia refrigeration system; and,
  • Efficient r-liquefaction of boil-off gas.

The Bear Head deal is expected to close on or before Aug 31, 2014. 

LNGL is in discussions with gas transportation companies and owners of gas reserves regarding the supply of natural gas from onshore and offshore Canadian natural gas supply and the Marcellus play in the northeast U.S., to the Bear Head LNG project site.

As part of this transaction and once it is completed, LNGL will appoint John Godbold as chief operating officer and project director of Bear Head LNG Corporation. He will be responsible for the project and report to LNGL’s managing director Brand. He has led energy projects for Pangea LNG, Gulf Coast LNG and El Paso Energy, and is a former NASA engineer.

Ian Salmon will be appointed chief financial officer and chief commercial officer following the close of the transaction. Salmon previously worked for El Paso Energy and Morgan Stanley.

“This is a significant transaction for LNG Limited and is consistent with our strategic plan to selectively secure sites that meet our criteria and develop a strong North American presence,” Brand said. “Importantly, Bear Head LNG will further de-risk the company’s asset base.

“We are particularly keen to secure opportunities where we can either replicate Magnolia LNG or substantially use all the company’s technical, engineering, technology and development expertise.

“Bear Head has considerable unlocked value and sunk costs that can readily be transformed into an LNG export facility. We are looking forward to working with local governments in developing this project that will have significant local economic benefits,” Brand said. “We have been undertaking due diligence on Bear Head since October 2013 so we are confident that we can hit the ground running and obtain all permits and approvals by mid-2015, and, during 2016, make a final investment decision.

Bear Head LNG will share an office in Houston with Magnolia LNG.