LNG faces possible surplus

Liquefied natural gas seems destined to move from famine to feast after 2010 in the Atlantic basin of North America.

There could even be an excess of liquefaction capacity, according to Dave Anderson, Anadarko Petroleum’s manager for international commercial development.

Two rival LNG proponents have signed shipping contracts with Maritimes & Northeast Pipeline that could potentially bump the pipeline’s capacity from the Canadian Maritimes by almost 1.56 billion cubic feet per day.

Anadarko Petroleum and Spain’s Repsol announced agreements July 15 with Duke Energy-controlled Maritimes & Northeast to deliver 813 million and 750 million cubic feet per day respectively.

Anadarko’s Bear Head terminal in Nova Scotia and Repsol’s joint venture with Irving Oil to build Canaport in New Brunswick are both scheduled to come on stream in 2008.

Expansion not expected to match LNG projects

It is currently contracted to carry 550 million cubic feet per day from the Sable gas project offshore Nova Scotia, although current volumes are only 450 million cubic feet per day as the field’s reserves decline.

With the LNG contracts in place, Maritimes & Northeast is moving to detailed design and stakeholder consultation, hoping to file regulatory applications in early 2006 with Canada’s National Energy Board and the U.S. Federal Energy Regulatory Commission.

Costs and pipeline capacity will not be known until later this year, but Anadarko is confident that unused capacity on Maritimes & Northeast will mean Bear Head volumes can be accommodated through additional compression, rather than looping pipe at a greater cost.

The regasified LNG will be delivered to markets in the northeastern United States and Atlantic Canada.

Maritimes & Northeast President Doug Bloom said in a statement that LNG is a “major step forward for the energy sector in Atlantic Canada and the northeastern United States. Adding another source of natural gas supply will provide increased energy reliability, security and choice to consumers in both regions.”

He said LNG in Atlantic Canada makes sense because it takes advantage of an “established and expandable pipeline system, provides direct access to premium and growing markets and locates new energy infrastructure in a developing supply region.”

Surplus could occur within five years

He said Anadarko believes there will be an “excess of liquefaction capacity after 2010 in the Atlantic basin.”

The company itself does not expect any LNG projects to be located outside of Canada and the U.S. Gulf Coast in eastern North America.

But Anadarko is wasting no time in pushing ahead with the US$650 million Bear Head facility.

It will start pouring foundations this summer for two storage tanks with combined capacity of 7.6 billion cubic feet.

Anderson also said negotiations for natural gas supplies outside North America are at an “advanced” stage and should result in a supply contract being signed this summer.

James Hackett, president and chief executive officer of Anadarko, said Bear Head is a chance to secure international opportunities to monetize gas reserves that would not normally be open to an independent of Anadarko’s size.

Repsol and Irving, who have formed a new company called Canaport LNG, expect to import LNG from several global locations, starting at 1 billion cubic feet per day.

Front-end engineering design for the terminal has been completed and the partners intend to request proposals for engineering, procurement and construction later in July.

Repsol, which is targeting major growth in LNG assets in the Atlantic, Pacific and Mediterranean basins over the next five years, has rated the New Brunswick terminal as a “very important step in completing its integrated LNG value chain.”

—Gary Park