Eastern Canadian LNG export plans face supply quandary

Wed Feb 4, 2015 1:06am EST
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By Dave Sherwood

PORTLAND, Maine (Reuters) - Eastern Canada has joined a race to export North America's vast natural gas riches to energy-hungry markets overseas, with four projects betting the far-flung Atlantic provinces will be the easiest route to Europe and India.

But firms behind those proposals, such as Spanish oil giant Repsol and Australia's Liquefied Natural Gas Ltd have one major hurdle to clear: huge investments are needed to expand regional pipeline capacity to feed them, and it is unclear who will pay.

"They have come at a rush over the last four or five months," said analyst Mark Pinney, of the Canadian Association of Petroleum Producers. "But these plants will need to get their act together quickly, both at the supply and demand end."

The stakes are high. If successful, the projects would provide a much-needed economic boost in Canada's Atlantic provinces, broaden the market for plentiful North American gas, and shore up energy security in parts of Europe.

It effectively means, however, tapping U.S. gas deposits that would require investing billions of dollars in pipelines crossing New England - a gas-starved U.S. northeast with a history of blocking such investments on environmental grounds.

"The interstate pipeline companies are not going to construct facilities unless they have firm commitments," said Thomas Kiley, president of the Massachusetts-based Northeast Gas Association.

Together, the four projects proposed for New Brunswick and Nova Scotia would take an estimated 1.5 trillion cubic feet of gas per year - the equivalent of three weeks' worth of U.S. consumption - liquefy it, and ship it abroad in tankers from Canada's rocky coast.

The geography makes sense. The voyage from Eastern Canada to Europe is about four days shorter than from the U.S. Gulf Coast, where a cluster of competing terminals has been proposed, and is also quicker than from U.S. East Coast ports.   Continued...

The Canaport liquid natural gas (LNG) facility in Saint John, New Brunswick is seen in a 2010 handout photo. REUTERS/Repsol/Handout