Shell buys terminal in Kitimat as it looks to export LNG

With KM LNG and the BC LNG Co-operative already on the path to locating LNG plants in Kitimat, Shell Canada has added its name to the list.

With KM LNG and the BC LNG Co-operative already on the path to locating LNG plants in Kitimat, Shell Canada has now officially added its name to the list.

Cenovus announced last Thursday that it had sold the old Methanex site to Shell.

Back in 2005 Cenovus entered into a five-year agreement with Methanex under which Methanex handled the condensate being imported by Cenovus through the closed methanol plant’s terminal.

Under that agreement Cenovus had first right of refusal if Methanex decided to sell the site within that five year period.

And after that five years, assuming no other buyer had come along, Cenovus would have to buy it from Methanex.

Cenovus did that in November of last year, but when delivering its first quarter results for 2011 stated it planned to sell the site (Northern Sentinel, March 23).

Explaining the sale, Cenovus spokesman Rhona DelFrari told the Sentinel, “terminal service is not part of Cenovus’ core business, we are in the oil and gas industry.”

Therefore it had never been the company’s intention to keep the property.

“So, over the last few months we have been speaking with various parties about the potential sale.”

DelFrari added Cenovus believed the sale was in the best interests not just of its shareholders, but also the community of Kitimat.

As for what happens with the importing of condensate, she said the amount going through Kitimat’s terminal represented about 20 per cent of the company’s needs.

And that would continue for “the foreseeable future”.

However, she added, “Possibly, at some point in the future when Shell makes a decision about the future of that terminal, then we may have to look elsewhere for our diluent.”

But since Cenovus had signed the original deal with Methanex, “many more sources of diluent have opened up in North America so we’re confident we will be able to find diluent elsewhere.”.

As for how much Shell has paid for the site, DelFrari said that under a confidentiality agreement it could not be released.Cenovus bought the site from Methanex for about $37 million.

Shell spokesman Stephen Doolan also declined to reveal the purchase price.

“It’s in the early stages so we can’t really get into details on the cost side,” he said in an interview.

As for whether Shell intended to locate an LNG plant on the site, he would only say that Shell and its joint venture partners were “exploring the potential”.

He said those partners are Korea Gas, Mitsubishi of Japan and the China National Petroleum Company.

“Getting the location is part of the early stages of exploring the project,” Doolan repeated.

Not surprisingly, mayor Joanne Monaghan was upbeat about the announcement.

“I was really pleased,” she said.

“This is good news for Kitimat.”

That said, it would probably take two years for Shell to go through the regulatory processes.