Liquefied Natural Gas: Target Asia

Apache’s Timothy O. Wall has a tough job: selling customers on a product that’s yet to be produced at prices that might never prove to be economical. Wall, who runs the Canadian division of Apache, the largest U.S. independent oil and gas company, is courting Asian natural gas importers such as Korea Gas, hoping they will buy a liquid form of the fuel from a $3.5 billion terminal planned for Kitimat, B.C. That entails getting customers to sign 20-year purchase contracts for liquefied natural gas, or LNG, processed at the planned complex on Canada’s northwest coast. If successful, the project could open up lucrative new markets for Apache and partners Encana and EOG Resources as they prepare to build North America’s first plant designed to super-chill and export gas in huge metal canisters. “The Kitimat facility and ones like it will allow you to export natural gas to markets you’ve never been able to access,” Wall says. “What we’re doing is trying to achieve a structural change in the industry.”

U.S. and Canadian gas producers are hoping LNG exports will help boost prices at home. North American prices are about half what they were in 2008, largely the result of a boom in extracting gas from shale rock formations. That glut has slashed prices for U.S. supplies to less than one-third those paid by utilities and chemical makers in nations such as Japan. The investors in North American facilities such as Kitimat are betting they can profit from that price arbitrage by transporting their cheap gas to energy-hungry Asian markets.