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Canadian LNG wants US gas Concern that facilities will be denied access, could be crucial to demonstrating 20-year supply to Canada’s National Energy Board Gary Park For Petroleum News
Proponents of LNG development on Canada’s East Coast have cause to worry about how far moratoriums on fracking in their shale gas region will extend and whether Nova Scotia and New Brunswick will follow British Columbia’s lead and impose a special levy on LNG exports.
But, for some, there is an even deeper concern over whether their facilities will be denied access to United States gas, which could be crucial to their chances of demonstrating a 20-year supply before Canada’s National Energy Board will grant an export permit.
The U.S. Department of Energy has granted a number of applications to ship U.S. gas overseas, but none of those involves Pieridae Energy’s planned C$8.3 billion LNG facility in Nova Scotia.
That’s about to be put to the test through a request by Pieridae that, like two other projects in the Atlantic region, hopes to rely primarily on gas from the Marcellus formation in Pennsylvania, New York, West Virginia and Ohio.
DOE submission It made a submission in late October to the DOE, arguing that its Goldboro project in Nova Scotia “would generate significant benefits to the U.S. public” provided it can draw on U.S. gas supplies.
Pieridae proposes to pipe gas to Canada’s Maritimes through a pipeline that would cross the U.S.-Canada border in Maine.
But it has filed two applications to the DOE in the past year, emphasizing that its major customer is Germany’s E.ON which has signed a 20-year deal to take 5 million metric tons a year.
Mark Brown, Pieridae’s director of project development, noting that the DOE has taken years to process export requests for some U.S. LNG projects, said his company hopes to receive a response in the first half of 2015 if the Goldboro plant is to meet its 2019 target for starting commercial operations and ship up to 10 million metric tons a year.
H-Energy, Bear Head Meanwhile, India’s H-Energy said it has tentative deals with unidentified customers for about half of the planned capacity for its C$3 billion LNG plant in Nova Scotia.
The facility is designed to export 13.5 million metric tons a year, starting with an initial 4.5 million metric tons in 2020.
H-Energy said in a statement that front-end engineering and design work is due for completion by the end of 2014, while a final investment decision is scheduled for mid-2016.
Australia’s Liquefied Natural Gas Ltd., operator of the Bear Head project in Nova Scotia, said earlier in November it has applied to the NEB to export 12 million metric tons a year, starting at 8 million metric tons in 2019 and ramping up over the next five years.
The application also seeks a license to import 503 billion cubic feet of gas as feedstock from the Marcellus to bolster supplies from Eastern Canada.
Project director John Godbold said all major governmental approvals are in place or applications are before regulators, with the NEB filing representing a “major milestone.”
Chief Financial Officer Ian Salmon said the startup LNG volumes have doubled because “the market is stronger than we anticipated and we are well positioned to meet our customer needs.”
Impact of fracking moratoriums But the fracking moratoriums in Nova Scotia and New Brunswick have placed shale gas development “in question,” said Mike Whalen, general manager for Maritimes & Northeast Pipeline, while adding he is optimistic the mood related to a “tremendous resource potential” will eventually change.
“It’s a matter of time to build some comfort level with the public and some time to have governments comfortable that they have the proper regulations in place,” he told an energy conference in Halifax, Nova Scotia.
However, Nova Scotia Energy Minister Andrew Younger told the conference that although his province’s moratorium has caused “some angst or confusion” it is supported by municipalities, First Nations and the “majority of Nova Scotians.”
He said his government needs time to deal with concerns about the safety of hydraulic fracturing, monitor studies, conduct research and develop sound regulations.
Brown said the moratoriums would not slow Pieridae’s LNG work because it has made progress on accessing gas that does not require fracking, while keeping an eye on further developments of offshore gas fields in Atlantic Canada.
The prospect of British Columbia’s planned two-tier tax structure for LNG being transferred across Canada is unclear.
Brown said his company has not had any discussions with Nova Scotia regarding a tax, “but we anticipate that we will continue to have discussions with the province on various project-related topics, including taxation.”
The government has not indicated whether or when it might decide on an LNG tax, although the feeling within industry ranks is that such a move is only a matter of time.
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