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Ferus and Encana's LNG Plans Focus on Canada

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Ferus and Encana's LNG Plans Focus on Canada

According to a December 2012 Conference Board of Canada report, demand for Canadian natural gas should double through 2035. Much of this demand growth will be driven by increased domestic consumption of natural gas in power generation and bitumen production. However, demand from Asian markets for liquefied natural gas (LNG) also is expected to spur more than $29 billion in liquefaction terminal investments during the next two decades. Although the liquefaction projects referenced in the report will be based in British Columbia to accommodate trans-Pacific shipping, Ferus LNG and Encana Corp. are teaming up to produce LNG that will stay closer to home.

"Total diesel demand in Western Canada is 10 million gallons [38 million liters] per day," said Blaire Lancaster, director of government and public affairs for Ferus LNG. "Given the significant environmental and economic benefits of running off natural gas as an alternative to diesel, Ferus LNG will be working to convert as much of that demand to LNG as possible. As more end-users successfully make the transition to natural gas, this industry will grow rapidly. Ferus LNG believes natural gas is the fuel of the future."

Ferus and Encana plan to build a 190,000-liter-per-day (50,193 gallons or approximately 85 tonnes per day) liquefaction plant near Grande Prairie, Alberta, to serve regional Oil Sands and shale gas operations. The output of the planned Alberta facility would pale in comparison to mega-projects in British Columbia; for instance, the initial capacity of Chevron and Apache's proposed Kitimat LNG export project would be 5 million tonnes per annum. Nevertheless, Ferus and Encana contend they are on the leading edge of an "emerging energy economy" in Alberta and British Columbia: providing the exploration and production and other sectors with LNG to power high-horsepower (HHP) engines. Their facility will nearly triple the amount of LNG fuel available in Western Canada.

"LNG is quickly becoming the fuel of choice for HHP engines in both highway and off-road applications in North America," according to Eric Marsh, Encana's executive vice president and USA Division senior vice president. "This project demonstrates the increasing viability of LNG as a fuel alternative for a wide range of industries."

In the case of Encana, the company realized a $12 million fuel cost savings in 2011 by using natural gas rather than diesel in its drilling rigs and company trucks. Although specific figures are not yet available for 2012, Encana expects even greater savings for the year.

Encana's partner in the LNG project is cutting its own diesel usage as well.

"Ferus Inc. understands the economic and environmental benefits of using LNG as an alternative fuel," noted Richard Brown, Ferus' president and CEO. "[N]ot only are we operating the first two LNG tractors in Alberta, we plan to convert our entire truck fleet over the next five years. We are very pleased to be working with Encana to help develop the natural gas engine market by ensuring fuel supply and operating the necessary equipment to safely and reliably get the product to our customers' site."

Ferus and Encana will initially focus on oil and gas market applications such as fueling drilling rigs, fracturing pumpers and heavy-duty service trucks. Moreover, the companies have designed and are building specialized mobile storage and dispensing equipment to support the entire LNG supply chain.

The project partners also are working to ensure that the Grande Prairie plant will be flexible enough to support greater LNG adoption by other industries such as trucking, rail, mining, marine, industrial processing and remote/off-grid power generation. Some of these other industries have made significant overtures toward LNG in recent years. For instance, trucking companies from Montreal to Vancouver have placed large orders for LNG-powered trucks. In addition, the freight railroad CN is conducting a natural gas tender car pilot project. In Quebec, a ferry operator has ordered what reportedly will be the first LNG-powered ferry on the continent.

"There is a lot of good momentum happening right now in Canada in terms of developing the natural gas engine market," said Lancaster.

The Alberta liquefaction plant should begin operations by year's end, but Ferus is already contemplating growth opportunities in Grande Prairie and beyond. "[A]s demand from our customers in the Grande Prairie, Alberta area increases, we will certainly be looking at expansion of that facility," concluded Lancaster. "Additionally, Ferus LNG is currently evaluating other areas in North America for additional plant locations. Our Alberta project is the first of several LNG plants we plan to build in the near future."



Matthew V. Veazey has written about the upstream and downstream O&G sectors for more than a decade. Email Matthew at mveazey@downstreamtoday.com

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