August 16, 2018 / 10:18 AM / 3 months ago

Canada's Pieridae Energy in talks to sell LNG to Swiss utility

LONDON/WINNIPEG, Manitoba (Reuters) - Pieridae Energy, considering whether to build Canada’s first major liquefied natural gas (LNG) export terminal, is in talks with Axpo, a Swiss utility and energy trader, for a 10-year supply deal, the companies said on Thursday.

A general view shows the nuclear power plant KKW Beznau of Swiss energy company Axpo near the northern Swiss village of Beznau July 18, 2015. REUTERS/Arnd Wiegmann

A sales and purchase agreement would boost the chances that Pieridae would decide to build the C$10 billion ($7.6 billion) Goldboro project in Nova Scotia on Canada’s Atlantic Coast, although high hurdles remain.

Canada is rich in gas but has yet to export major shipments of LNG to Asia from its Pacific Coast or across the Atlantic. The lack of big export terminals has depressed natural gas prices in Canada, while U.S. producers benefit from terminals along the Gulf Coast.

Axpo said in a statement that it would buy LNG from Goldboro’s second train, or liquefaction unit, for sales across Europe.

Deliveries are estimated to begin in the third quarter of 2023.

The Axpo deal is ready to be finalized once Pieridae secures gas supplies from Eastern Canada and the northeastern United States, hopefully within five months, said Pieridae Chief Executive Alfred Sorensen in an interview.

Sorensen declined to identify the size of the Axpo supply agreement. Pieridae already has a 20-year agreement to sell five million tonnes annually to German utility Uniper.

Goldboro would produce 10 million tonnes annually starting in 2023 if construction begins by year-end.

Securing financing for such a large project, mainly through offtakes, is a big challenge, however, for a company with a C$195 million market cap.

“Are we delusional about how we can get to the finish line? It really has been from the very beginning about how we can work with the Germans and work to improve their energy security,” Sorensen said.

Germany depends heavily on gas imports from Russia and is seeking to diversify its suppliers. Pieridae is finalizing a loan guarantee of at least $3 billion from the German government.

The company is “very close” to securing enough committed sales to make a positive final investment decision, he said.

Pieridae is also in talks to acquire an undisclosed Alberta gas producer to supply Goldboro, he said.

Five other projects on Canada’s Atlantic Coast have been proposed although initiatives have sputtered in recent years when global LNG prices fell.

Another handful have been proposed for Canada’s Pacific Coast, where LNG would be exported to Asia.

One of the largest is LNG Canada, a proposed C$40 billion export terminal in Kitimat, British Columbia. A decision whether to proceed with that project is expected by year-end.

LNG Canada is a joint venture led by Anglo-Dutch giant Royal Dutch Shell Plc.

Reporting by Sabina Zawadzki in London, Rod Nickel in Winnipeg, Manitoba and Julie Gordon in Vancouver; editing by Elaine Hardcastle and Phil Berlowitz

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