Export License granted to Kitimat LNG Terminal

November 14, 2011

On October 13, 2011, the National Energy Board (NEB) granted Kitimat LNG a 20-year license to export liquefied natural gas (LNG) from British Columbia. Apache Canada Ltd., EOG Resources Canada Inc., and EnCana Corp. are the proponents of the $5 billion project that would provide Canadian producers access to markets where LNG prices trade at between 3 and 4 times North American natural gas prices.

The license will allow Kitimat LNG to export 10 million tonnes of LNG a year. Apache and EOG’s shares of this volume represent more gas than Apache currently has in established reserves, and over the 20-year term, will use up almost all of EOG’s current reserves. Concerns over gas shortages, and the effect on gas prices in North America were addressed by the NEB, stating that “the export of the proposed term volume is unlikely to cause Canadians difficulty in meeting their energy requirements at fair market prices.” In support of their statement, the NEB cited EnCana’s reserves, which are substantially greater than its export commitment, and the development of shale gas resources as sufficient gas sources to satisfy the increase in demand from the Asian market.

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