The Future of Liquid Natural Gas in British Columbia By: Aleksandar Acimovic
What is Liquid Natural Gas? It is a natural gas that has been converted into a liquid due to the ease of storage and distribution. LNG is odorless, colorless, non-toxic, and non corrosive.
Where does Natural Gas come from? Natural gas is pumped from the earths crust. Than the gas is cooled to -260 degrees Fahrenheit (126.7 degrees Celsius) where it becomes liquid. The reason for turning it into a liquid is because of transportation. Much like oil it is transported in a supertanker.
Purposes of LNG Used for heat Used for power generation US energy information administration claims 65 million people use natural gas to heat their homes. (total population of US is 313.9 million) Natural gas provides 76% of the energy for residential and commercial sectors. When LNG is converted into compressed natural gas it becomes more usable to consumers. EX) cars & trucks run on compressed natural gas.
Honda Civic GX Runs on compressed natural gas (CNG) From 2004-2011 rated first by the American council for an Energy efficient economy in the greenest vehicle of the year. Furthermore, a home refueling option is available. Estimated fuel cost to drive 25 miles combined with city and highway. CNG $1.47 per gallon Gasoline $1.93 per gallon
What is BC Trying to Accomplish? Fortis BC is looking to build a $400-million expansion at the current LNG plant on Tilbury island in Delta. The plant has been operating since 1971. Early 2000 - Capital for LNG technologies fell. - The reason? New technologies emerged and more companies in liquefaction and regasification.
What is Fortis Doing Now? They already supply the trucking sector (looking to grow that business). They all have hopes of expanding into rail and marine (BC ferries)
The Expansion Plan Another storage tanker similar to the existing one. Current tanker is able to hold 0.6 billion standard cubic feet. Proposed tanker will be able to hold one billion standard cubic feet. To be completed by 2016. In addition 300 persons a year will be needed for construction and 5-6 permanent jobs will become available.
Problems with Expansion 1) requires approval from the BC oil and Gas Commission. 2) A reduced role by Liberal government on BCUC s role on the energy project. What is the mission of the BCUC? Ensure repayers receive safe, reliable, non-discriminatory energy services at fair rates from utilities it regulates. Furthermore, share holders of those utilities are afforded a responsible opportunity to earn a fair return on their invested capital. Avoid monopoly
LNG Project Proposals in BC Export projects (various stages as of March 6 2014) Aurora LNG ( North of Prince Rupert) Discovery LNG (Campbell River) Kitimat LNG (Kitimat) Kitsault Energy Project (Kitsault) LNG Canada (Kitimat) Steward Energy LNG (Stewart) Triton LNG Partnership (No site chosen, Kitimat & Prince Rupert under construction) WCC LNG Ltd. (No location) Woodfibre LNG Project (Squamish) Woodside Proposal (Grassy point, North of Prince Rupert) Non of the sites proposed above are backed by Fortis BC Prince Ruper 5 facilities Kitimat 4 facilities
A Message from the Premier Current expectations for LNG growth in BC shows that the industry could add as much as $1 trillion in cumulative gross domestic product between now and 2046. Christy Clark is referring to Asia markets.
Facts about Global LNG Able to be shipped overseas and has been safely around the world for 50 years. From 2000-2009 the volume of LNG that has been traded on an annual basis increased by 77%. Currently, largest demand growth is in Asian pacific markets. Specifically in Japan and South Korea. Furthermore, China and India are also competing for natural gas supply. JAPAN AND SOUTH KOREA LARGEST IMPORTERS IN THE WORLD.
The Goal of British Columbia To achieve three LNG facilities by 2020 a strategy was created with three priorities. 1) Keep BC competitive in the global LNG markets. 2) Maintain BC s leadership on climate change and clean energy. 3) keep energy affordable for families communities and industry. For Example Exporting two trillion cubic feet of natural gas per year will be equivalent to i. More than 70 nuclear facilities. ii. Approximately 100 averaged sized coal plants.
How will Transportation Occur? A special insulated tanker is able to transport LNG around the world. The cargo capacity of one ship is 210,000-266,000 cubic meters Each ship is equipped with a re-liquefaction plant. A very low possibility of ships igniting or exploding should there be a spill.
What about the Environment? It is a stable low risk fuel. It a spill were to occur LNG would warm up, rise and dissipate into the atmosphere. The resulting gas from a spill is methane. If a spill occurs and no ignition occurs it would only build to a higher concentration. High concentrations of vaporized methane will lead to asphyxiation. Asphyxiation lack of supply of oxygen to the body, abnormal breathing, choking. If leaked into water vaporization occurs faster Converting fleets and vehicles to natural gas helps province meet its greenhouse gas reduction goal. Natural gas burns much cleaner than gasoline or diesel, results in a drop in pollution of greenhouse gases.
Energy Minister Bill Bennett The Liberals overrode the BCUC s high dispensing LNG fee recommendations. They did not want to hurt their chances of an LNG-fuel sector in BC. Bennett is convinced Fortis BC knows what to charge for fuel. Furthermore, BC is interested in ensuring the new fueling sector-which is claiming to help reduce carbon emissions if established. Bennett went on to say BC ferries is poised to order new ships that may use LNG, and there are also a few large trucking firms he know that are looking to make the switch to LNG.
What do other Companies Think? Ferus a North American company providing oilfield cryogenics, LNG and CNG does not feel they are being treated fairly. Ferus claims that the governments move is prejudice to private companies willing to invest private capital to develop a LNG industry in a competitive and sustainable way. They further say that the BC government has no effectively overturned any previous decisions the BCUC has made. Preventing a regulated utility from participating in a fairly competitive market. By removing all authority from BCUC the ratepayer is now no longer protected.
Forecasting Errors Two year ago it was forecasted royalties would reach $846 million the actual number was $441 million. Three years ago Spring budget set revenues from natural gas royalties at $447 million. The reality was $367 million. The Worst Guess Finance minister Colin Hansen (2010-11) forecast revenue from natural gas royalties to be $1.25 billion, reality $144 million. The claims come from massive differences in natural gas prices between North America and Asia. They also have to do with the shutting down of Nuclear plants in Japan. (must get energy from somewhere else)
BC was Not In Line with US Energy Needs Missed mark on royalties because it failed to predict increase in US energy production. The implementation of Fracking as James has already told us about is what hurt roylaties. BC is no longer exporting as much energy to the US. BC will now look else where.
LNG and Exports Countries that are already exporting LNG include Qatar, Malaysia and Indonesia. Australia also making commitment to export. US also wants to export LNG. BC is not alone in the fight to get these major contracts from China, Japan, and South Korea.
Indonesia Exports 1977-2013
LNG and Global Warming If BC Liberals achieve their goal it will be equivalent to adding 24 million- 60 million cars to the worlds road. The premier claims that a net benefit for the environment will be achieved because less coal will be used in China. Zero evidence baking this claim. Methane has a global warming potential 86 times of carbon dioxide over 20 years.
Old Government VS New Government In 2007-2008 Gordon Campbell brought in climate action policies. For example carbon tax and greenhouse gas reduction targets. If LNG projects are to move forward and still meet GHG targets, every sector in BC must reduce emissions by unprecedented amounts. How does one move forward? The new Liberals declared that burning natural gas for LNG production is considered to be clean energy.
COSTS Not a renewable resource. Very little planning for domestic use. No guarantee of contracts from overseas. Government is showing incompetence (forecasting errors). Going against previous greenhouse act. Jobs (if money is not made back). Bias government hurts foreign investment. Difficulty exporting to the US. Creating of a monopoly hurts competitive markets. Workers can be injured. Over time, equipment becomes less reliable. If turned into methane, contributes to global warming. Without the supervision of the BCUC ratepayers can be taken advantage of. To late to the party?
BENEFITS Safe for environment. Transportation is safe. Large return on investment if contracts are signed. Clean fuel. Cheap. The government is able to still follow previous policies relating to greenhouse gases (what ever helps you sleep at night). Less emissions (compared to oil). Stable fuel costs. Quieter. Japan, China, and South Korea can get cheap natural gas (increased supply). The premier is able to meet her job creation plans.
Recommendations Work with BCUC. Focus on one project at a time. Begin negotiation talks with countries that are demanding and supplying LNG/CNG. Be realistic about what you forecast. Create long term not short term goals that are attainable. Look into domestic uses first before looking to export. Be more realistic about how many plants can be constructed in the amount of time. Pay more attention to the international supply and demand of natural gas.
The END Thanks to everyone for listening and being part of this experience with me for the last four months and a special thanks to David for guiding me in a positive direction. It was great knowing all of you Leo Bi, Siwei Cai, JiYeon Chae, Zheng wen Chen, Mei Ling Fan, HauYan Gao, Jin Won Han, Jie Jin, Kale Wild, Jilly Xu, Nadia Zhang, Joy Zhou, Junxi Zhu. GOOD LUCK IN THE FUTURE =)