With the closest proximity to Asia, new LNG export terminals along the Pacific Northwest will soon be providing unprecedented supply to a gas-hungry market, making this pipeline builder a surefire bet…
Just like the Department of Energy has been rubber-stamping new permits in the US, Canada’s National Energy Board dished out a few of its own last week.
The Canadian government has given the go ahead to establish four liquefied natural gas (LNG) export facilities off the west coast of British Columbia.
They were approved back in December 2013, but the licenses were officially handed out on March 26th.
While the operations within these facilities will fall under provincial jurisdiction, it will be the lawmakers on Parliament Hill in Ottawa that will oversee the LNG exports.
In a statement, Natural Resources Minister Greg Rickford said:
“The approval of these licenses is a major step forward in opening the door for Canada’s natural gas industry to access world markets. Opening new markets for our energy products supports our government’s top priority: creating jobs, growth and long-term prosperity for Canadians.”
The licenses were issued to four privately-held LNG producers: Pacific NorthWest LNG, Prince Rupert LNG, Woodfibre LNG, and WCC LNG.
Three out of the four are earmarked for sites in the coastal towns of Prince Rupert and Kitimat in northwestern BC, while Woodfibre plans to develop a facility in the southwest town of Squamish.
Asia is undoubtedly the key export market for BC terminals because they are so close. A tanker leaving Prince Rupert will take just 11 days to arrive in Japan.
Compare that to a ship departing Louisiana’s Sabine Pass, through the Panama Canal, and arriving in Japan in just over 43 days — that’s a clear economic advantage.
The infrastructure in the Canadian province isn’t even built out yet, so it’ll likely be a few years after US LNG export operations are fully underway before the first LNG tanker sets sail from Prince Rupert.
That being said, the National Energy Board’s approvals officially kick off the deployment process, so construction will soon be underway.
One of the key components to BC’s LNG business is transporting gas from the province’s interior to the coastline.
The majority of BC’s natural gas is produced in the Peace River region in the northeast, which borders with Alberta.
The BC government estimates that the area contains over 50 Tcf of gas.
Current pipelines bring gas from Peace River all the way down central BC and to the Metro Vancouver region on the south coast for distribution.
But now, brand new pipelines will need to be built to transport supplies directly west to Prince Rupert and Kitimat.
And I’ve identified one midstream with blueprints already in hand can’t wait to start laying pipe down:
Top Pipeline Stock To Buy Today:
As I’ve alluded to in recent months, midstream companies are an excellent way to gain exposure into the growing natural gas industry.
Only this time, I’m not just seeing opportunities in US shale gas regions.
Pipeline giant Spectra Energy (NYSE:SE) is a leading North American natural gas infrastructure company with a market cap over $25 billion.
Though they have operations throughout the continent, they have a particularly strong focus in British Columbia.
In fact, they are the biggest midstream operator in BC…processing and transporting 60% of all the natural gas produced in the Canadian province.
Their current infrastructure moves around 2.4 bcf of natural gas per day — enough to heat 10 million homes for a whole year.
One of their primary projects in BC has been to build what’s dubbed the Westcoast Connector, an 850-kilometer (525-mile) pipeline from the Cypress area of Peace River to Prince Rupert.
It’s been quite the game of patience for Spectra thus far, which has been quietly awaiting government approval on export terminals so that they can begin construction.
Upon completion near the end of the decade, the 48-inch diameter Westcoast Connector will have a transporting capacity of 4.2 bcf per day.
Spectra will partner with another natural gas veteran, UK’s BG Group (OTCMKTS:BRGYY) to implement the project.
BG Group will construct a large-scale liquefaction facility on Ridley Island in Prince Rupert, which the pipeline will feed into.
The facility will have an initial capacity of 14 million tonnes per annum, and bring at least 150 LNG carriers each year when the project commences. Eventually, the terminal will be capable of handling close to 300 ships annually.
Over the next 5-6 years, it’s expected to generate over 4,000 jobs and hundreds of ongoing jobs after completion.
Routing through the challenging and sensitive terrain of the Rocky Mountains is still being worked out, but initial cost estimates are in the range of $6 – $8 billion, and nearly $23 million per year will be paid in taxes.
It’s a massive project requiring big companies to undertake it, so naturally it would take the track record and resources of Spectra and BG Group to take it on.
When the taps turn on for the Westcoast Connector, British Columbia will be a bona fide natural gas leader.