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One shelved, seven still standing Unable to solve supply problems, Anadarko mothballs Nova Scotia LNG plans; only Irving-Repsol project has certain supplies, leaving seven Canadian projects in various stages of development; Kitimat only fully permitted terminal for the West Coast Gary Park For Petroleum News
Once on the leading edge of Canada’s ambitions to enter the liquefied natural gas age, the Bear Head project in Nova Scotia has been mothballed.
After an apparent losing struggle to arrange LNG supplies, Anadarko has officially written off its investment in a receiving terminal that was intended to be a Canadian pioneer in the business.
Bear Head was originally scheduled to start sending 1 billion cubic feet per day of gas to customers in the northeastern United States and eastern Canada in 2008.
Bit by bit that goal faded, culminating in March last year when Anadarko slowed on-site construction of the C$700 million project while it tried to overcome problems of securing long-term LNG supplies.
Then a $125 million deal to sell the project to privately owned US Venture Energy collapsed in September and no other interested parties have surfaced since then.
Once Anadarko disposed of its conventional oil and gas holdings in Canada, the outlook dimmed even further.
Al Walker, the company’s chief financial officer, said Feb. 7 that Anadarko has taken a $111 million charge against its fourth quarter 2006 earnings for the terminal “which we are in the process of mothballing.”
Dan Fougere, president of the Strait Area Chamber of Commerce, said the decision was a setback for hundreds of local residents “who had been counting on jobs.”
But Anadarko’s decision was “not surprising to us. … The writing may have been on the wall for a while,” he said.
However, he said the Bear Head site offers “tremendous potential” for a petrochemical plant.
Fougere said he understands Anadarko will continue its search for a partner to supply LNG and, if that effort fails, he expects others to fill the void with a fresh proposal.
Seven proposals in various stages That leaves seven proposed LNG terminals in various stages of development or approval across Canada, although only one is viewed as being backed by supplies — the joint Canaport venture by Irving Oil and Spain’s Repsol in New Brunswick.
It remains on track to start handling 1 billion cubic feet per day of LNG imports by late 2008.
Keltic Petrochemicals has plans to develop, construct and operate a combined LNG/petrochemical plant in Nova Scotia.
Last year it sold the LNG portion to Maple LNG, a Canadian affiliate of 4Gas of London, England, which has agreed to provide LNG feedstock for the petrochemical operation.
Quebec has three LNG ventures in the planning stages: The Rabaska project by Enbridge, Gaz Metro and Gaz de France; Gros Cacouna by Petro-Canada and TransCanada; and a new entry last year by Energie Grande-Anse.
Petro-Canada Chief Executive Officer Ron Brenneman said earlier in February that even if regulatory approvals are received for Gros Cacouna the partners “won’t start putting shovels in the ground because other pieces need to fall into place.”
That includes reaching complex supply agreements, led by high-risk attempts to secure LNG from Russia’s Gazprom, which, in return for allowing Petro-Canada to gain a stake in a liquefaction plant, wants an interest in the regasification terminal and marketing in North America.
Rabaska in environmental assessment Meanwhile, Rabaska is moving through the environmental assessment phase in hopes of starting commercial operations in 2010, with initial terminal capacity of 50 million cubic feet per day.
Steve Letwin, Enbridge executive vice president of gas transportation, told a conference call in January that serious discussions are continuing to obtain supplies and the partners are optimistic “we can move the project forward.”
He said that in the absence of increased LNG imports, the “gas crunch (in North America) becomes a reality.”
The two projects proposed for the northern British Columbia coast remain on track.
Kitimat LNG is the only fully permitted terminal for the West Coast of the United States and Canada and is sticking to its timetable of starting commercial operations at a 1 bcf per day facility in 2010.
The focus this year is on negotiating supply contracts after a lengthy period of traveling the globe and meeting with potential suppliers, as well as starting construction.
Westpac LNG launched its regulatory review and environmental assessment in mid-2006 and also hopes to begin construction this year, aiming to open a regasification facility for 500 million cubic feet per day in early 2011.
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