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Canadian LNG partners in Russian squeeze play
Gary Park For Petroleum News
The Russians appear to be playing both ends against the middle in negotiating possible long-term supply contracts for two liquefied natural gas plants in Quebec.
In the process they are pitting a team of TransCanada and Petro-Canada against a partnership of Quebec utility Gaz Metro, Calgary-based Enbridge and French energy company Gaz de France in a contest to secure LNG through Gazprom.
For Petro-Canada it could be another setback in what the company has conceded is a “slow process” to arrange a 25-year LNG contract for its Gros-Cacouna terminal on the St. Lawrence River, with plans to sell 500 million cubic feet per day of gas to customers in Eastern Canada and the United States. The clincher for the project has always been striking a deal with Gazprom, which has held out for an equity stake in the LNG plant or a role in selling the gas.
Three years of negotiations Those negotiations have now dragged out over three years, reaching a high point a year ago when Petro-Canada signed a preliminary engineering agreement with Gazprom for a US$2 billion liquefaction plant in the Baltic.
At various times, Petro-Canada executives have hinted that a supply contract was imminent. Now they apparently find themselves going head-to-head with partners in the Rabaska project, an C$840 million LNG terminal also planned for the St. Lawrence River.
Rabaska Chief Executive Officer Glenn Kelly told the Globe and Mail his company is on the short list of prospective buyers for long-term LNG contracts with Gazprom.
He was recently assured in Moscow that Gazprom — despite widespread doubts among analysts — is on the verge of proceeding with the Baltic LNG plant to open new markets in North America.
Kelly said that, unlike Petro-Canada, Rabaska is not seeking a stake in the Baltic plant, but he would not say whether Gazprom wants a stake in the Quebec plant.
The Rabaska partnership has the advantage of long working arrangements between Gazprom and Gaz de France, including a recent asset swap that allows Gazprom to directly enter the French market.
Growing list of skeptics But the chances of Gazprom actually proceeding with the Baltic plant have a growing list of skeptics.
Chris Theal, an analyst with Tristone Capital, warned six months ago that the Gros-Cacouna partners were well down the list of those hoping to access Russian LNG, with Gazprom turning its attention to a deal with BP.
Elena Herold of PFC Energy, a Washington, D.C.-based consulting firm, has described the Baltic plans as “more talk than real.”
A close observer of the Russian energy industry, she said it makes better sense to carry Russian gas by pipeline to Europe than by tanker to North America.
Aside from that, Herold said Gazprom, regardless of its wealth of gas resources, is struggling to serve its existing customers.
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