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Atlantic Canada full of life Region’s LNG plans taking shape: 3 projects in works, 4th with new Australian buyer, while BC bogged down in myriad of challenges Gary Park For Petroleum News
Agap in the outlook for Canada’s two LNG fronts shows signs of widening, with prospects for the Pacific Coast increasingly obscured in fog, while the Atlantic Coast sees hope on the horizon.
The uncertainty in British Columbia is compounded by talk of rising construction costs, a squeeze on available labor, a failure to lock up major sales contracts, doubt surrounding the provincial government’s willingness to back down from its proposed tax regime and shuffling within the ranks of owners.
The East Coast, meanwhile, is making strides in the vital area of negotiating memorandums of understanding with six potential buyers for AC LNG, wholly owned by India’s H-Energy, to support three possible liquefaction trains, each with capacity of 4.5 million metric tons a year.
H-Energy managing director Darshan Hiranandani told the Halifax Chronicle-Herald his company is aiming to secure 15-year take-or-pay contracts, with customers given the option of either sourcing the LNG from the operator or having it liquefy the gas.
H-Energy is also planning to sell at a gas index price, with no linkage to oil, unlike British Columbia’s plan to blend gas and crude oil indexes.
The customers lined up so far would take 6.75 million metric tons a year (equivalent to 315 billion cubic feet a year of feedstock natural gas), which would be destined for India (where H-Energy is building a $2 billion natural gas-fired power plant), the Middle East and Europe - though none of the buyers has been identified. Talks are also underway with other possible buyers in South Asia.
Construction pace picking up The pace is also picking up on the construction side, with Foster Wheeler in the United States due to complete pre-front end engineering and design work by December, setting the stage for a FEED contract to be awarded in the first quarter of 2015.
An application for an export permit is expected to be filed with the National Energy Board in October, coinciding with the completion of a project description that will undergo an environmental impact assessment.
H-Energy is hoping it can make a final investment decision by mid-2016 and start LNG shipments from the first train in 2020.
The first phase of the Nova Scotia project is estimated to cost about $4 billion, rising to about $6 billion to double capacity.
Gas supplies could come from Central or Western Canada, the Marcellus in the northeastern United States or the Canadian Maritime region.
Resistance over fracking But the tentative progress towards gas production in the Maritimes faces resistance from those who want to block the use of hydraulic fracturing to accelerate development of unconventional gas fields in Nova Scotia.
David Wheeler, president of Cape Breton University, speaking for an expert panel, said more research is needed into the impact of fracking “before anyone could take a view on whether this is a good or a bad idea.”
The Nova Scotia government imposed a two-year moratorium on fracking in 2012 in response to public outrage that was expressed at a series of hearings over the possibility that fracking could contaminate groundwater or pollute the atmosphere and political strife in neighboring New Brunswick over the use of fracking technology.
The Halifax-based Ecology Action Center was surprised by the panel’s initial findings, given that 10 discussion papers it had earlier released took a more positive view of the use of technology to develop the region’s gas reserves.
Nova Scotia Energy Minister Andrew Younger said he is concerned that prolonged debate is creating a rift among communities.
He said the government, not the panel, will make a final decision on the moratorium and will show it has listened to its residents.
Sufficient demand cited Younger also said he welcomes progress on the AC LNG project, suggesting that H-Energy’s plan to seek an export permit shows it is “fairly confident it has the ability to go ahead in terms of customers and gas supplies.”
He also said that plans by Pieridae Energy Canada to export up to 10 million metric tons a year, starting in 2020, from its $8.3 billion Goldboro project and the prospect that Spain’s Repsol could add an expert terminal to its Canaport LNG import facility at Saint John, New Brunswick, could be the stimulus for pipeline construction to deliver increased gas shipments into Atlantic Canada.
Colleen Mitchell, president of the Atlantica Center for Energy, said there is enough global LNG demand to support multiple projects in the region, although finding sources of natural gas and the timing of projects will be key decision-making factor.
Hiranandani said there is sufficient demand for LNG and potential gas supplies to see all three projects go ahead.
Bear Head could get second wind There has also been a hint that a stalled LNG project led by Anadarko could be getting a second wind with an announcement that Australia’s Liquefied Natural Gas Ltd. has a deal to acquire Bear Head LNG for C$11 million.
The assets include rights to an LNG terminal and 225-acre site where a “majority” of site preparation is completed for two 180,000 cubic meter LNG tanks.
Bear Head was given a green light by regulators in August 2004 and construction of a C$650 million LNG import facility started in 2005, then abruptly stopped when Anadarko was unable to negotiate a supply of natural gas.
The construction permit was later extended to 2015 to give Anadarko time to find potential partners.
The Australian company said it hopes to turn Bear Head into an export facility to move 4 million metric tons a year, with potential for expansion.
Discussions are taking place with various possible suppliers in onshore and offshore Canada and the Marcellus.
The company’s managing director Maurice Brand said he is confident all permits and approvals can be obtained by mid-2015 and during 2016, leading to a final investment decision.
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