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BG joins Canada LNG race with pipeline plans

BG Group and Spectra Energy Corporation are poised to build and operate an 850 km pipeline

UK-based BG Group and Houston-based Spectra Energy Corporation are poised to build and operate an 850 km pipeline which will carry feedstock to a liquefied natural gas plant on the British Columbia (BC) coast.

BG and Spectra will each own 50% of the project. Spectra will build and operate the line, while BG has agreed to contract for all the pipe’s proposed 4.2 billion cubic feet a day (cf/d) capacity.

BG is studying the feasibility of a two-train LNG development, with a potential start-up date of 2019. A decision to sanction the project could come as soon as 2015, and it would easily be the largest terminal announced to date for Canada’s west coast.

Financial terms of the BG/Spectra deal were not disclosed, but estimates for the pipeline and offloading terminal range from C$6bn ($6.6bn) to C$8bn.

The pipeline is the key link between shale-gas fields in northeast BC and a proposed export terminal near Prince Rupert. Earlier this year, BG confirmed it had exercised an option to purchase a 90-hectare site from the local port authorities.

As well as processing and transport, BG is also looking to invest in production to supply gas for the facility. BG operates five LNG export facilities worldwide and operates one of the largest fleets of LNG carriers in the world.

This marks BG’s third foray into Canada - it last exited the Canadian upstream in 2007, selling production assets to Calgary-based Progress Energy for C$525m. Progress was sold to Malaysia’s Petronas earlier this year for C$6bn, and those properties form the basis of plans for a planned LNG terminal.

With the latest announcement, eight terminals and three separate pipelines are in various planning stages for Canada’s west coast, including proposals by Shell and US independents Apache and EOG Resources that have attracted participation from Asian gas giants Mitsubishi, Kogas and PetroChina.

Separately, Apache and EOG said they are looking to sell up to 20% of their interests in the proposed Kitimat terminal, which is the furthest advanced in terms of regulatory approvals. In October 2011 the companies were granted Canada’s first long-term gas export licence from the country’s National Energy Board.

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