Steelhead CEO says offshore gas not in his company’s plans

The offshore capability of an FLNG (floating liquefied natural gas) terminal immediately raises the question as to whether the Steelhead/Malahat LNG project, announced Aug. 20, has opened the door for new discussion on the issue of offshore oil and gas.

Since 1972, the federal government has imposed a moratorium on offshore drilling on the B.C. coast, but the petroleum industry has continued to explore the potential for undersea oil and gas development by re-interpreting pre-moratorium drilling data and using low-impact technologies.

The Tofino Basin alone is estimated to hold 266 billion cubic metres of natural gas – no messy hydraulic fracturing (fracking) or invasive trans-provincial pipeline required.

In a 2012 paper authored by Joel Wood, the right-leaning Fraser Institute asked, “Is it time to lift the moratorium on offshore oil activity?”

In his paper, Wood suggested the moratorium has served its purpose in postponing offshore development until better and safer technology has evolved elsewhere.

“Having waited to develop its offshore fossil fuel resources leaves B.C. in the enviable position of learning from regulatory improvements in other jurisdictions,” he wrote.

Steelhead LNG CEO Nigel Kuzemko was asked whether the current industry campaign to frack and export Northern B.C. gas, despite concerted opposition from environmentalists and First Nations is, in part, a strategy to “destigmatize” offshore petroleum extraction as the lesser of two evils.

Kuzemko said his company is not looking beyond the current LNG/FLNG proposals with Huu-ay-aht and Malahat First Nations. While he raised the possibility that the floating Malahat terminal could be installed at a different location, he categorically refuted the suggestion that the plant could be diverted to service any future Tofino Basin gasfield.

“Absolutely not. The facility wouldn’t work with a natural gas well. We’ll be taking pipeline quality gas – the same quality of gas that is provided in Vancouver,” he explained.

Raw offshore gas requires a major amount of processing to remove marketable secondary hydrocarbons such as propane and butane, as well as the low-grade solvent once known as “drip gas,” now used to dilute heavy oil from the Alberta tarsands.

Each of those by-products must be extracted, stored and shipped using specialized equipment and loading terminals. Currently, liquid petroleum gas (LPG) ships regularly pass through Vancouver harbour after loading at the Chevron Canada refinery in Burnaby.

“FLNG” projects currently under construction, then, are actually floating natural gas refineries with all the required ancillary functions, and would load LPG ships as well as LNG.

“That’s when you’re getting into a Shell Prelude project,” Kuzemko said. “Ours is much simpler than that.”

For that reason, Kuzemko said he is confident that installing a single liquefaction technology onto a barge or ship could be accomplished without a protracted design/build process.