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Nova Scotia LNG projects hinge on US Two projects need US natural gas feedstock, approval from US Department of Energy to export to non-Free Trade Agreement countries GARY PARK For Petroleum News
Two LNG projects planned for Nova Scotia are in the unusual position of relying on the United States to secure both feedstock natural gas and export markets.
And two more proposals for Canada’s Maritime region are equally dependent on the U.S. - one by Spain’s Repsol to add export capacity to its Canaport LNG import facility in New Brunswick and one by India’s H-Energy, which has plans for an export terminal in Nova Scotia that will eventually export 13.5 million metric tons a year.
Fred Bergman, senior policy analyst with the Atlantic Provinces Economic Council, said the big unresolved question is where the gas will come from and how will it be delivered to the LNG plants.
Transportation plans from the U.S. are counting on Spectra Energy, which is planning to build a new gas pipeline from the Marcellus field in Pennsylvania to New England, where it would connect with Spectra’s Maritime & Northeast Pipeline, which carries Nova Scotia’s gas exports to the U.S. and is now pegged for reversal.
In addition to receiving export permits from Canada’s National Energy Board, both Pieridae Energy and Bear Head LNG have received a go-ahead from the U.S. Department of Energy to re-export U.S. gas to countries with which the U.S. has free trade agreements.
They are now awaiting a U.S. decision on whether they can sell to non-FTS countries.
Both companies say they anticipate making final investment decisions in 2016, depending on how successful they are in locking up U.S. gas supplies.
Pieridae Pieridae Chief Executive Officer Alfred Sorensen said he is the verge of deals arranging enough gas to support his startup LNG shipments of 10 million metric tons a year which would satisfy the company’s contract with German utility giant E.On, which has agreed to buy LNG for the European market.
He told the Globe and Mail that the German company is “very solidly behind” the project, which he said places Pieridae in a “unique” position among Canadian LNG developers.
Sorensen said he is hoping the U.S. DOE will issue a re-export permit for European sales, although he is uneasy that tensions between the Harper government and Obama administration could stall a decision until after Canada’s Oct. 19 election to see who forms the next government.
For many years, Nova Scotia has exported gas from its offshore field to the U.S. Northeast, but those supplies will start a steep decline over the next five years unless companies develop gas resources that have been discovered but were not considered commercial.
Bear Head Bear Head project director John Godbold said his company is evaluating various gas sources, including the U.S., offshore Nova Scotia and Western Canadian gas.
He said Bear Head - which was acquired by Australia’s Liquefied Natural Gas Ltd. last year - was the first Canadian project on either coast to receive all of the necessary regulatory approvals, targeting an initial 8 million metric tons a year in 2019, building to 12 million metric tons in 2024.
The company has the permits it needs to start construction and is now negotiating with prospective customers, but a non-FTA clearance is essential to sign contracts with European and other buyers, Godbold said.
To date, the NEB has approved more than 20 billion cubic feet per day of Canadian exports, almost double Canada’s production in 2014, but the NEB said it doubts that all of the export projects will proceed.
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