Two National Energy Board-approved LNG projects hinge on U.S. permits

Two National Energy Board-approved LNG projects hinge on U.S. permits

Two proposed liquefied natural gas projects have received approval from the National Energy Board to export LNG, but they are counting on the United States to build pipeline capacity into New England in order for them to obtain the supply needed to underpin their ambitious plans.

Pieridae Energy Ltd. and Bear Head LNG Corp. each received approval of their gas export licence late last week.

The federal regulator has now approved more than 20 billion cubic feet a day of exports – nearly 50 per cent higher than Canadian production in 2014 – but it noted it is unlikely that all the LNG export projects will proceed.

Much of the LNG talk in Canada has focused on plans to kick-start the industry in British Columbia.

Meanwhile, Maritime provinces are eyeing four projects, although questions continue about where the East Coast LNG facilities will get their gas supply.

Repsol SA is pursuing plans to add export capacity to its Canaport LNG import facility near Saint John, while India’s Hiranandani Group has plans for an export terminal north of Halifax.“The big questions are: Where is the gas going to come from, and how are you going to get it to an LNG facility,” Fred Bergman, senior policy analyst with the Atlantic Provinces Economic Council, said in an interview.

Both Pieridae’s project at Goldboro, N.S., and Bear Head’s proposed plant on the Strait of Canso have received permits from the U.S. Department of Energy to re-export American gas to countries with which the United States has free-trade agreements, and are waiting on applications to sell to non-FTA markets. Both companies say they are aiming for a final investment decision next year.

Pieridae chief executive officer Alfred Sorensen said he is closing in on deals to secure enough gas to support the first train of LNG exports, which would be enough to satisfy the company’s contract with German utility giant E.On, which has agreed to purchase gas for the European market. Mr. Sorensen said the gas supply will be a combination of Canadian and U.S. production.

“Our German partner is very, very solidly behind the projects,” Mr. Sorensen said in an interview from Calgary. “Having secured long-term customers gives us a unique advantage among Canadian LNG developers.”

Mr. Sorensen said he is hoping U.S. Department of Energy (DoE) will issue the required permit to re-export American gas to Europe, but he worries that, given tensions between the Obama administration and the Harper government on energy issues, “they may not want to do anything until after the [Canadian federal] election to see who they’re dealing with.”

Nova Scotia’s offshore has supplied gas to the Maritimes and U.S. Northeast for years but will begin a steep decline later this decade unless companies develop gas reserves that have been discovered but were not considered commercial. As well, Spectra Energy Corp. is planning to build a new gas pipeline from the prolific Marcellus field in Pennsylvania to New England, where it can be connected to Spectra’s Maritime and Northeast Pipeline, which would be reversed to carry gas into Nova Scotia.

That project has run into stiff opposition in Massachusetts but Spectra vice-president Richard Kruse said the company is confident it can overcome those hurdles, obtain federal approval and meet a 2017 in-service date.

Bear Head project director John Godbolt said the company is looking at a variety of sources for gas supply, including offshore Nova Scotia, U.S. shale gas and even Western Canadian gas shipped through TransCanada Corp.’s main west-to-east pipeline. Australia’s Liquified Natural Gas Ltd. bought the Bear Head project in 2014 and has two other LNG projects – one in the United States and one in Australia – under development.

Bear Head has all the permits it needs to begin construction and is now concentrating on lining up customers, Mr. Godbolt said. But the non-FTA permit is critical for signing contracts with European and other customers.

“We’re doing everything we can to get that moved along as quickly as possible,” he said. “We were the first Canadian project – whether on the East Coast or West Coast – to have receive all the requisite Canadian approvals … and getting to that level of approval is one of the requisites that DoE requires before you get the non-FTA approval.”

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