MGM Energy Corp MGMCF

RE: Horne River gas to go to Kitimat

[OilEng]

Hi geodude13;

Thank you for pointing out the transportation issues of getting Delta Gas to the Kitimat LNG plant.  While I agree with you that the Horn and Monteney gas will be main uses of the LNG terminal in Kitimat, I respectfully think you are mistaken in your comments about the TCPL system not being tied into the gas system delivering gas to Kitimat.

The TCPL system is already tied into the Spectra Energy pipeline south of Ft. Nelson near the McMahon Station.  No regulatory approval required. the Spectra Pipeline carries the gas to west coast markets.  PNG has regulatory approval to build a spur line off of the Spectra Pipeline (located south of Prince George) to provide gas to the Kitimat LNG plant.  This pipeline has not yet been built.  So their is no physical reason that Mackenzie Delta gas could not be shipped to Kimat.

With regard to your comment that TCPL would not want to supplying gas to PNG because they are a competitor.  TCPL does not own or control the gas.  It is a shipper like a trucking company.  If MGM or KOGAS contracts to sell its gas to Asia, they pay TCPL to ship it to the Specta line tie in, then Specta charges to ship it to the PNG pipeline and then the Kitimat LNG facililty charges to compress the gas and then an LNG tanker charges to ship it to market. 

The only reason that MGM would want to go to all this expense is if the gas price in Asia is significantly higher than the price in North America.  The price that is going to count in North America is the price the oil sands are going to pay.   Oil Sands gas consumption is forecast to increase from 2 Bcf/d to as high as 7 Bcf/d in 2020.  This forecast is based upon oil sands and in-situ production being ramped up from 2 to 5 million BOPD because peak oil has been reached.  The average gas consumption of oil sands and in-situ projects is 1.5 Mcf per barrel of oil produced.  When I last attended an MGM meeting, they indicated that they thought most of the delta gas would go to the oil sands.  This is why Imperial and Shell are so interested in the Delta.  They both have large and expanding oil sands operations and declining Western Canadian gas production.