It's a Gas!! Let's Build an Import ...er... Export Terminal!!

In Case Anyone Believes the Petro-Biz is Short of Cash

Here's a cool bit of news.  Kinda restores your belief that anything is possible and good times are still rolling.

First, Turn back the clock to 2002. Things are looking pretty sketchy in the North American natural gas tank. Reserves are low. Exploration has pretty much hit a dead end. So the industry decides it's time for another liquid natural gas (LNG) import and regasification terminal. They pick a spot on the Texas coast, 70 miles south of Houston on Quintana Island and, shortly, there is an ownership group, Freeport LNG Development LP (50% owned by financier Michael Smith and 50% by ConocoPhilips) and a plan, with a tentative clientele (ConcocoPhilips and Dow Chemical) already waiting in the wings. Budgeted at $500,000 03/04 dollars, the terminal began operating in 2008.

In the meantime, what happens? Moore's Law kicks in. Computer hardware and software gets good enough to provide 3-dimensional geological modeling which enables precisely controlled directional horizontal drilling and hydro fracturing techniques to be used in natural gas exploration and extraction. Opens up whole new vistas for gas exploration.

Surprise, surprise! By 2010, the natural gas situation in North America is registering impending glut. What do you do if you just hit the "on" button on an importing terminal, when suddenly the place you are importing LNG to is already floating in the stuff? Easy. You switch plans and make it an export terminal. This is a little more difficult than switching the direction of flow in the pipes. Now you have to liquify gas and load it onto ships, instead of unloading LNG off ships and regasifying it. Totally different process.

Import Terminal + $2B = Export Terminal

Put together a slightly different group of players, throw another $2 billion of 2010 dollars at it and presto, you will have a new LNG export terminal ready to ship 1.4 Bcf/day to China by 2015.

Look at it another way. From 2003 to 2015, you've got a whole buncha engineers, equipment, businessmen, workers, techinicians, etc., etc., basically chasing their tails around.

And there's nothing to say that 2015 is going to turn out any more of a sure thing. Maybe China finds enough shale gas of its own. Maybe Russia finds new sources and gives the Chinese a deal they can't refuse. Maybe the whole fracking process runs into too much opposition due to effects on groundwater or other snag. Maybe some new alternative fuel comes along and obsoletes everything. Not necessarily all that far-fetched.

Yet they say this industry doesn't have the ability to invest in making the tar sands more environmentally sustainable.

Taxpayers Paying Half the Tab for Natural Gas to Process Tar Sands

You couldn't even dream of a cozier deal - let alone ask for one.

Big oil is running roughshod over Canadian and Alberta taxpayers, as well as the environment, with sweetheart natural gas deals that amount to a massive disincentive to use more environmentally friendly energy, says an article in the Tyee. The oil sands burn through 20% of the natural gas used in Canada. Why? Because we practically give it away to them.

The oil companies get to deduct the cost of fuel from their provincial and federal taxes. Then they get to "double dip" and deduct the same fuel costs from the royalties paid to Alberta.

Easy to see why there is zero incentive for any of these companies to use sustainable energy sources for processing the bitumen. Another reason why it's called "dirty oil" despite the promotional campaigns to the contrary.

Sale of NB Power to Hydro Quebec - beyond the high voltage rhetoric

Face it, NB Power has got itself in a position where $4.8 Bil of debt is sinking it. NB residential customers are paying 60% more for their power than Hydro Quebec customers and industrial users are paying 20% more. And, with major assets coming up for replacement, the future is looking bleak indeed.

Prices and discontent with the utility are already high - and a viable operational model for the utility has yet to be unveiled by NB's official opposition or the opponents to the Hydro Quebec deal.

Now major renovations are underway at the Point Lepreau nuclear facility and several old coal generating stations are due to be refurbished or scrapped, which, when all is said and done will add perhaps billions more to the debtload.

Not surprisingly, the announced sale to HQ has caught New Brunswickers in an already owly mood. And it's not getting any sweeter.

Frantic commentators on message boards, news story comment rants and blogs have stated things like, "Quebec is trying to spread French across Atlantic Canada", "no truck nor trade with separatists", "this deal will be NB's Churchill Falls", or... "I'm not paying one cent to the separatists". Obviously, there is already a severe brainpower shortage in certain parts of NB, (as is the case everywhere!). The fact remains though that there is a huge opposition to the deal even though New Brunswick business (i.e. McCains & Irvings) and government are very much in favour of it.

Really, it comes down to a perceived loss of sovereignty and a (simply unthinkable) perception of getting shown up by Quebec. New Brunswickers, especially the English-speaking population, just cannot bear the humiliation of having mismanaged their utility into the ground, only to have it magnanimously 'rescued' by Quebec.

In all the hyperbole written over this deal, I don't think I have seen a single reference to price vs. value. Meanwhile, HQ is already supplying over one-third of the electricity consumed in New Brunswick, so the question of sovereignty over energy supply is already well watered down.

I think that if one person (like, say, a "news reporter") in New Brunswick would actually take the trouble to discover that B.C. Hydro is now in the process of buying a one-third share in the 450Mw Waneta Dam for $825 million, then the already high decibel level of the protest going on would be increased by tenfold!

The trouble is, the nature of the protest in NB is totally knee-jerk and emotional, so no one seems to care about finding actual reasons why the deal should be opposed.

And, having just said that, I think it is the B.C. Hydro - Waneta deal with Teck Resources that is the exceptional case, going against the grain of market price logic. The NB Power deal seems to be well justified by market conditions, even if the pending BC deal makes it look like a giveaway.

So... what would make the deal palatable to New Brunswickers?

This would answer the problems that most people have with the deal:

1. A clause that would tend to narrow the difference paid by NB and HQ residential customers after the five-year rate freeze already agreed by HQ
2. Some way of making the sovereignty of the assets less of an issue

If the deal succeeds, it opens up opportunity for greater synergies. With the NB coal-burning generating stations nearing the end of their useful lives, it must be assumed that HQ has in mind to replace a lot of this high-emission dirty energy with clean sustainable energy from the HQ grid.

The other possibility is that HQ would take advantage of the opportunity to introduce new elements of alternative sustainable power into NB, leaving the utility free to sell additional excess hydro power to the U.S.

Although New Brunswick and Quebec share many common features, there are also many differences that could prove interesting as the search for plausible future models of heating and power generation are concerned.

For one thing, has anyone thought of this...?:

Geo-thermal conversion for New Brunswick

Someone out there ought to be researching practical ways of introducing geo-thermal heating into the mix, for example. Say the New Brunswick government, using a small portion of the theoretical debt carrying potential that is freed up with this deal, were to sponsor a geo-thermal installation program that could be implemented on an individual home-by-home basis... This would effectively put the heat-generating capability in the hands of the individual homeowners of New Brunswick.

Do the math. There are 300,000 households in New Brunswick. Let's say, for example, that an individual geo-thermal system could be engineered to sell for $10,000. And let's say that 100,000 households would qualify and take advantage of an initial 10-year program.

That would represent a $1 billion price tag - a pretty small price to pay for the virtual guarantee of sovereignty and sustainability for heating in an entire province! We see, though, that the $1 billion doesn't really need to be paid by N.B. The price would largely be paid by home owners (perhaps via a system of provincially guaranteed loans) and this, largely, out of savings they would realize in their heating bills.

The program could include aspects of manufacturing to be handled in New Brunswick, and of course there would be the jobs benefit of the contracting to install the systems. The resale value of the homes would be greatly increased. The high concentration of geo-thermal heating in N.B would set the province up as a center of excellence and expertise in sustainable energy, potentially developing export products.

A substantial portion of geo-thermal conversions would be from oil, as well as electric, so both heating oil and electricity suppliers would be losing sales. However, since Irving and HQ are seen to be big winners in the deal to sell NB Power, it seems like a no-brainer that they would be on board for such as deal as this. Not to mention that any electricity not needed to heat N.B. homes could be heating U.S. homes more profitably.

The province, meanwhile, wouldn't have to actually go into debt to manage the program - it could be a cooperative arrangement amongst all stakeholders - the province, banks, utilities, contractors and home owners.

The project could be run in conjunction with other projects for commercial and industrial buildings.

The whole thing would contribute to massively reduce the carbon footprint of New Brunswick at virtually no cost to the province, or to anyone, at the same time as building a new industry and providing thousands of permanent jobs.

Frankly, it appears to me that it would be so easy to turn this thing into a massive positive for New Brunswick, that my "conspiracy theory" sensors are starting to tingle...!

Canadian company Saltworks reduces energy needed for desalination by 80%

Ben Sparrow and Joshua Zoshi have come up with an ingenious way to desalinate water using a series of brine solutions of different concentrations, together with a solar-assisted evaporation component.

According to an article in the Economist the best reverse osmosis systems currently consume about 3.7 kWh of electricity to produce 1,000 litres of drinking water, whereas the Canadians' company, Saltworks, claims to be able to produce the same amount of drinking water using less than 1 kWh of electricity.

Cool...

To develop such a technology in Vancouver, where it rains non-stop and you rarely see the sun. =)

More on this new technology can be found at Cleantech Blog.