Russians stymie Canadian LNG plan

For the best part of four years, Petro-Canada has been the model negotiator, but in the end it seems like the Russians are not coming, throwing a large wrench into plans for a C$1 billion LNG terminal in Quebec.

In a final bid to succeed in late 2007, Petro-Canada offered Russian gas giant Gazprom a 20 percent stake in the Gros Cacouna plant it has been trying to develop in partnership with TransCanada.

“In essence, the ball is in their court,” said Petro-Canada Chief Executive Officer Ron Brenneman, barely disguising his frustration. “They need to make their decision. We are just waiting.” He hinted at the difficulties six months ago, saying Petro-Canada, although confident “some pieces” would fall into place in 2007, was wary about “getting overextended” on the project.

The high-stakes effort crumbled Feb. 7 when Gazprom abandoned plans for a US$3.5 billion LNG liquefaction plant near St. Petersburg, forcing the Gros Cacouna co-developers to look elsewhere for LNG supplies.

It has been a sorry experience for Petro-Canada, which, from the outset, had to deal with skeptics, who questioned the wisdom of trying to do business with the Russians.

But the company made every effort to win over Gazprom, with the bargaining reaching the highest government levels.

Current Canadian Prime Minister Stephen Harper and his predecessor Paul Martin raised the matter with Russian President Vladimir Putin, with Harper and Putin issuing a joint statement in mid-2006 promoting the stabilizing role LNG could play in global energy markets, pledging to take measures to facilitate investments in developing LNG markets.Putin also endorsed efforts to reach a supply agreement between Gazprom and Petro-Canada.

Now Petro-Canada, which has already seen its cost estimates climb from about C$660 million, is left to sift through the wreckage, disappointed that Gazprom will not be the anchor supplier.Brenneman conceded that the Gazprom deal is dead, while a company spokesman said the Gros Cacouna partners will “have to reconsider our options for developing the (Quebec) site.”

—Gary Park