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Canada LNG: In with a whimper Two federal project approvals raise barely a ripple as proponents continue search for supplies, face competition from Europe, Asia Gary Park For Petroleum News
Two of Canada’s proposed liquefied natural gas projects have received regulatory green lights, but they were accompanied by barely lukewarm enthusiasm from the federal government, reflecting the trouble all Canadian LNG ventures have experienced in trying to secure supplies.
The government support was so tepid that confirmation of approval for the Rabaska project in Quebec was dragged out of federal officials a week after it was issued by the cabinet.
Environmental clearance for a C$4.6 billion terminal in Nova Scotia was announced in a brief statement by Environment Minister John Baird and disclosed by Foreign Affairs Minister Peter MacKay, the senior Member of Parliament from Nova Scotia.
In both cases, the proponents concede they are still scouring the globe for LNG supplies.
Projects in search of LNG The Rabaska partners Enbridge, Gaz de France and Gaz Metro said only that they are confident they will soon secure a long-term source, opening the way for construction to start this year, but they have made similar claims over a long period.
Steve Letwin, Enbridge’s executive vice president of gas transportation, told analysts five months ago that supply rather than location for regasification facilities will determine the future of North American LNG projects.
He said then the Rabaska partners were working with several potential suppliers and expected to make an announcement by early 2008.
Letwin predicted that 13 billion to 15 billion cubic feet per day of regasification capability will be available in North America by the 2013-15 period, with the supply of LNG heavily dependent on the development of Russian fields.
The Nova Scotia project backers, Keltic Petrochemicals and Maple LNG (controlled by the Carlyle Group of Washington, D.C.) said the approval improves their chances of finding a supplier within six months to a year, as well as obtaining a contract with the Maritimes and Northeast Pipeline to deliver some of the gas to the United States.
Study: gas supplies tight But Angela Tu Weissenberger, the author of a study on the outlook for LNG in North America, said the gas supply situation is “very tight right now” because of competing demands from Europe and Asia, which are ready to pay higher prices than North American buyers, resulting in a lower shipments to the U.S.
Cambridge Energy Research Associates pointed to trouble ahead in slashing forecast LNG imports to the U.S. for 2008 to 2.6 bcf per day from 3.2 bcf per day in the fall, although it is holding to predictions of 13.5 bcf per day by 2015.
The hurdles facing Canadian LNG schemes have come into sharp focus over the past year, with Anadarko shelving its Bear Head project in Nova Scotia after it failed to draw partners into the venture and had no luck in its hunt for supplies.
That was followed in February by the apparent collapse of Petro-Canada’s hopes to strike a deal, making Russia’s Gazprom the anchor supplier for its joint Gros Cacouna project in Quebec with TransCanada.
Analysts have not given up on the chances of finding other alternatives, although Ziff Energy Group’s Bill Gwozd said the challenge for LNG proposals that are far away from LNG supply sources is the incremental transportation cost.
B.C. projects in question The future of two projects in British Columbia is also open to question, especially for WestPac LNG which scrapped plans for a terminal at Ridley Island near Prince Rupert, citing runaway construction costs.
However, it is now pursuing a combined 500 million cubic feet per day natural gas and power generation plant on Texada Island, lying between Vancouver Island and the B.C. mainland, despite the likelihood of strong environmental and community opposition.
The latest word from WestPac is that it expects to start a regulatory review and environmental assessment process a year from now.
Still in the alive-and-breathing category is the Kitimat LNG project, the only fully permitted venture in B.C., which hopes to start construction in 2009 and launch commercial operations by late 2011, processing 1 bcf per day. But it, too, has yet to announce a supply contract.
The sole venture that is actually under construction is the Canaport terminal, currently almost half completed near Saint John, New Brunswick, that is designed to deliver gas to Canadian and U.S. markets.
The joint deal by Irving Oil and Spain’s Repsol is scheduled to go before the National Energy Board in late May with an application from Repsol for a 25-year license to import LNG and a 25-year license to export natural gas.
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