Kogas, Kitimat LNG sign gas supply agreement

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, June 1 -- Kitimat LNG Inc. has signed a memorandum of understanding to supply Korea Gas Corp. (Kogas) with as much as 40% of Kitimat LNG's production along with an option to acquire an equity stake in Kitimat LNG's export terminal.

Kitimat LNG said Kogas plans to purchase 2 million tonnes/year of LNG from the proposed terminal over 20 years at a total purchase value of more than $20 billion.

Kitimat LNG also said it is progressing with discussions with other potential terminal users and investors for terminal capacity, offtake from the terminal, and equity in the 5-million tpy project, which lies in Kitimat, BC.

Kitimat LNG and Mitsubishi Corp. earlier this year signed a heads of agreement under which the Japanese firm also will acquire terminal capacity and an equity stake in Kitimat LNG's proposed LNG export terminal.

Under terms of that agreement, Mitsubishi will buy 1.5 million tpy of terminal capacity and acquire a minority equity interest in Kitimat LNG's project.

Since then, the government of British Columbia has announced plans to help facilitate the participation of a number of First Nations in the Kitimat to Summit Lake Pipeline Looping (KSL) project.

The $1.2 billion (Can.), 1 bcfd KSL system, which was approved by Canada's federal agencies in March, would extend 290 miles from Summit Lake to the Kitimat LNG export project.

Under the agreement with the British Columbian government, First Nations will secure a direct interest in Pacific Trail Pipelines LP, developer of the KSL system.

First Nations along the pipeline route are due to receive $3 million (Can.) as an incentive for the ratification process and a further $32 million (Can.) to ensure that the First Nations have an equity position in the project.

Contact Eric Watkins at [email protected].