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Atlantic joins Canadian LNG race
Gary Park For Petroleum News
Canada’s dreams of entering the global LNG market have lurched from the Pacific Coast to the Atlantic Coast, with a little-known company guided by a well-known LNG promoter rolling out plans for a US$5 billion project.
Pieridae Energy Canada, describing itself as an infrastructure development company, said it plans a natural gas liquefaction plant and storage facility at Goldboro, Nova Scotia.
Pending regulatory approvals, securing sales contracts and arranging financial backing, Pieridae aims to produce the first LNG in 2018, targeting 5 million metric tons a year, along with a storage facility for 420,000 cubic meters.
Pieridae’s president is Alfred Sorenson, formerly president of Duke Energy’s European business unit.
He founded Galveston LNG in 2003 to act as the spearhead for the current Kitimat LNG venture on the British Columbia coast.
In 2010, Galveston shuffled off its holdings for C$300 million, resulting in Apache becoming 40 percent operator and EOG Resources and Encana acquiring 30 percent each.
Sorenson said at the time he wanted to remain involved in Kitimat, but based on the advice of investment bankers he realized the cost of capital was too high in Canada.
Pieridae describes itself as the “project lead in initial phases of development of a project,” which raises questions about whether it could follow the Kitimat path with the Goldboro project.
But Sorenson said he is confident the Goldboro plan can be made to work.
Atlantic Coast demand “We looked into other possible opportunities for LNG besides Kitimat and, after several important discussions with long-term users, we decided there is sufficient demand” for an Atlantic Coast LNG terminal, he told the Globe and Mail.
He said Europe and India are the two export markets in Goldboro’s sights because they are the areas “where we have either executed or are very close to executing MOUs (memorandums of understanding) with long-term buyers of natural gas.”
Sorenson said contracts with international energy utilities could be locked up in 2013.
“With our location (in Nova Scotia) and proximity to existing gas pipeline infrastructure, Goldboro LNG is well positioned as the gateway to the global markets for North American LNG,” Sorenson said in his Oct. 24 statement.
Currently all of Canada’s proposed LNG operations are tied to the British Columbia coast, targeting Asian markets.
Peter Tertzakian, chief energy economist with Calgary-based ARC Financial, cautioned that breaking into the European market would not be easy given the availability of low-cost natural gas from Russia and the North Sea.
But Sorenson said potential European customers have told him they are eager to diversify their supply sources and natural gas from Canada meets that objective.
Tertzakian noted there is not much gas from Canadian producers in the Atlantic region.
He said that if most of the supplies were to come from the Marcellus shale in Pennsylvania and New York then the Goldboro terminal would serve merely as a transit facility for U.S. producers.
Goldboro a ‘Canadian solution’ However, Sorenson said Goldboro is giving priority to a “Canadian solution, both onshore and offshore,” suggesting reserves might be available from the Quebec shale play, even though the Quebec government has imposed a moratorium on development while it conducts an environmental study.
Pieridae said it expects Contact Exploration, which has natural gas properties in New Brunswick, will manage the operations and investment by Pieridae in the exploration and development of all potential Canadian onshore natural gas prospects.
Contact Chief Executive Officer Steve Harding said in a statement that Goldboro would promote resource development in the Atlantic Canada provinces “which might otherwise be compromised due to the prolific natural gas development” in the northeast U.S.
Sources in the Nova Scotia government said they understood Pieridae’s intention is to reverse the flow of the 840-mile Maritimes & Northeast Pipeline from Nova Scotia’s offshore Sable gas project to the northeastern U.S. pipeline to access shale gas production in Pennsylvania and New York.
Goldboro is also landfall for Sable production that has declined over the years to about 240 million cubic feet per day from a peak of 500 million cubic feet per day.
That decline should soon be offset by the startup of Encana’s Deep Panuke project offshore Nova Scotia, where first gas is due before year-end, ramping up to 300 million cubic feet per day within a month.
Currently, the neighboring province of New Brunswick has Canada’s only operating LNG facility — an import terminal in Saint John.
Spain’s Repsol is operator of that project, but is looking to sell its stake and has reportedly attracted interest from players in China, Spain, the United Kingdom, Russia and France.
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