Malahat LNG Means Tankers and Pipelines

The promise of jobs and economic development will need to be balanced against inevitable questions and consultation.

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In August 2015, The Malahat Nation, along with company Steelhead LNG Corp., announced a new liquefied natural gas  (LNG) terminal be built at Bamberton, a few kilometers south of Millbay along the Malahat towards Victoria.

The site was in the past a cement plant where over the decades much of the concrete used to build Victoria was manufactured, as well as exported to Vancouver and other markets.  The plant, first established just prior to the First World War, operated through the decades, eventually taking limestone from up the hill in the area south of Shawnigan Lake. At one point the plant, as part of Ocean Cement, was one of the largest in the western seaboard. Since the closure of the plant in December of 1980, the site has been the focus of numerous schemes and development efforts over the years. Notably, in the 1990’s real estate development plans were scuttled by opposition from the surrounding community related to noise and traffic concerns.

In July of 2015, the Malahat First Nation purchased the land from Bamberton Properties, LLP. This set the stage for the recent announcement that the Malahat First Nations would lease the land to Steelhead LNG for the construction and operation of a floating LNG facility. As a natural deep-sea port, the Bamberton site presents a good location for tanker traffic heading out into the Pacific after a short turn around Victoria to the south.

The proposed facility will reportedly handle six million metric tonnes of LNG each year. At roughly fifty million gigajoules of energy per each million metric tonne, the total energy shipped offshore will total approximately three hundred million gigajoules each year. For comparison, FortisBC as the main gas distribution company, delivers approximately two-hundred-million gigajoules to all of its residential, commercial, and industrial customers. In short, the project would seek to export approximately one and a half times all of the natural gas energy used by British Columbian residents and businesses.

LNG is natural gas that has been converted from its gaseous state to liquid through cooling to minus one hundred and sixty degrees. In the process the volume decreases by a factor of six hundred. This makes it both easier to ship, because it’s smaller volume per unit of energy, and more safe, because LNG does not mix with air and become combustible, as it does in a gaseous state.

To deliver three hundred million gigajoules of energy each year to the liquefaction plant would require daily deliveries of over eight hundred thousand gigajoules each day. For perspective, a normal house uses about one hundred gigajoules per year. The plant would process enough gas each day to meet the annual energy demand for eight thousand homes.Two issues immediately become evident; natural gas must be delivered to the plant for processing, and LNG must be shipped from the plant. As well, the plant must store a certain amount of LNG ready for transfer to tankers. The issue of gas deliveries is significant because the volumes required are beyond the incremental capacities of the existing Spectra pipeline that delivers gas from northern B.C.  to the coast, as well as the FortisBC pipeline shipping gas from that Spectra mainline across to Vancouver Island.

New pipelines will be needed and, on cue, Steelhead LNG announced a second project on September 1, 2015  to build a new pipeline from the connection point between Spectra pipeline, at its southern terminus, and Williams Pipeline, which serves markets south of BC, at its northern terminus.

The proposed pipeline would, according to the company announcement, travel overland and underwater to terminate at the Bamberton site. The pipeline would in itself be a major additional infrastructure required, and would face environmental and other reviews.

As well, given that the new pipeline would connect to Williams Pipeline, with access to gas supplies in the Rocky Mountain basin in the western U.S., it seems likely that at least some of the gas shipped as LNG will come from supply sources other than B.C. This means that royalties, a mainstay of the B.C. government strategy, would not accrue on all of the gas shipped. It seems likely that at least some will claim that shipping US gas through a Canadian plant is some sort of environmental off-loading.

The notion of a new pipeline, in the current well mobilized anti-pipeline environment, would also seem problematic for the project proponents. The type of fuel shipped makes little difference in the opposition that the project will likely face from environmental groups.

As an international pipeline, the Project will be subject to the approval of the Federal Energy Regulatory Commission in the United States and the National Energy Board in Canada. The initial leg of the pipeline, about fifty-five kilometers, will terminate at Cherry Point, the location of a three thousand acre BP refinery. From there it will travel seventy-five kilometers under water and terminate at Bamberton, some eight kilometers south of Mill Bay, B.C.

A second part of Steelhead LNG Corp.’s plan is to add another pipeline running to Port Alberni where they hope to build a second LNG terminal. It seems reasonable to speculate that the first leg of the pipeline would be a natural hedge against a failure of the Malahat and Port Alberni proposals in that it terminates at a major oil refinery site which, at over three thousand acres, could easily accommodate an LNG plant.

Large LNG tankers carry between two hundred and two hundred fifty thousand cubic meters. At roughly four hundred and fifty kilograms per cubic meters, that puts a typical large  tanker in the one hundred thousand tonne range. Taking the reported plant capacity of six million tonnes and dividing by the typical ship capacity  would require at least sixty ships per year but more likely this would fall in the range of sixty to one hundred ships per year, or roughly two each week.

The quick timing of the LNG announcement after the purchase by the Malahat First Nation, especially considering the complexity of an  LNG proposal of this type, could lead to speculation that the entire sequence of events had been set in place beforehand. In the end, there are many hurdles for this project to pass through; regulatory approvals, environmental approvals, public consultations, and, most important, financial and market feasibility.

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