|
Nova Scotia LNG venture fails; Alberta steps in to aid refinery
Gary Park for Petroleum News
Keeping what were once routinely accepted energy infrastructure projects afloat in Canada is now either a lost cause or a case of cracking open the public piggy bank.
These days every venture faces intense scrutiny from regulators, goes through legal battles and struggles to raise financing.
In the two most recent examples, one of the most doggedly pursued LNG ventures has been all but abandoned in Nova Scotia, while a troubled oil refinery in Alberta has been rescued - again - by the provincial government.
Goldboro LNG The future of the Goldboro LNG project, first announced almost a decade ago, has been halted while operator Pieridae Energy takes a different direction, without any further elaboration.
“Cost pressures and time constraints due to COVID-19 have made building the current version (of Goldboro) impractical,” said Chief Executive Officer Alfred Sorensen, conceding that his company had been unable to find a partner.
“As of June 30 we have not been able to meet all of the key conditions necessary to make a final investment decision,” that was initially estimated at C$5 billion that was brushed off by one veteran energy analyst as a “long shot.”
He said his company will now “assess options and analyze strategic alternatives” that could make an LNG project “more compatible with the current environment.”
In addition, Sorensen said Pieridae will further optimize the operation and development of its resources and midstream assets in the Canadian Foothills region of British Columbia, including a carbon capture and storage proposal.
Opposition had already been building from environmentalists who challenged the greenhouse gas emissions that would be associated with Goldboro, while Indigenous communities objected to the presence of a transient workforce in their area.
The project was designed to ship 1.4 billion cubic feet per day of feedstock gas from Alberta - including a C$190 million deal it reached in mid-2019 to buy Alberta gas assets from Royal Dutch Shell - liquefy it at Guysborough County and export up to 10 million metric tons of LNG to Germany.
Pieridae had asked the Canadian government for C$925 million as an initial investment, without getting a response.
At the peak of its optimism, Pieridae negotiated a 20-year agreement to sell LNG from Goldboro’s first liquefaction train – about 5.2 million mt a year - to the German utility Uniper SE.
The derailing of current plans occurred after May 31 when U.S. engineering firm Bechtel delivered a turnkey fixed-price proposal to build the plant, hiring up to 3,500 construction workers.
On the flip side, Alberta’s Sturgeon Refinery has been tossed a rescue line after a series of budget overruns that doubled the completion cost to about C$10.1 billion and construction hitches that delayed the startup date by four years to June 2020.
In a complex deal, Alberta will buy a 50% equity stake to share ownership with Canadian Natural Resources, CNR, and extend its current 30-year processing agreement by another decade.
The transaction is worth C$825 million, but the government says that move will cost taxpayers C$2 billion less than the original contract signed in 2011.
The refinery is designed to process about 70,000 barrels per day of diluted bitumen from Alberta’s oil sands into low-sulfur diesel and other products.
The facility incurred a C$500 million operating loss last year, according to a government budget update at the end of June.
Energy Minister Sonya Savage said the government made the new deal to correct a bad agreement that had iron-clad provisions it was unable to escape.
“We took all the risk and had no ability to control or mitigate that risk to control costs or to have any say in how the refinery was operated,” she told reporters. “With this deal, we save C$2 billion and we have a seat at the table.”
Savage said failure by the government to take an equity stake would have meant Alberta taxpayers “were on the hook, with no way to get out of the contract and no way to really have a say in cost controls or in the operations of the refinery.”
Under the original agreement, North West Redwater Partnership was owned equally by North West Refining and a subsidiary of CNR.
The change of ownership will mean the Alberta government is no longer paying processing fees and profits each month.
Richard Masson, the former chief executive officer of the Alberta Petroleum Marketing Commission, which is supplying 75% of the refinery feedstock, said the commission likely decided it would be better off to be an owner of Sturgeon rather than having one of the original partners “go out of business and put the whole project at risk.”
- GARY PARK
| 