East Coast LNG projects lining up to get in the game

Nova Scotia’s Bear Head project could be first Canadian terminal to ship gas overseas

Nova Scotia’s Bear Head LNG, proposed by Australia’s Liquefied Natural Gas Ltd., has a planned in-service date of 2019 | Image: Liquefied Natural Gas Ltd.

The number of publicly proposed liquefied natural gas (LNG) projects along Canada’s East Coast has not yet grown to the extent of the West Coast – there are currently six, versus 21 in B.C., according to Daily Oil Bulletin tracking – but one of the project proponents says LNG could start sailing overseas from Nova Scotia by 2019, which could make it the first export project in Canada.

Peters & Co. Ltd. believes that at least one project on the Canadian East Coast is likely to proceed at some point. Canadian West Coast projects are assumed to have a capital intensity of around $1,250 per million tonnes per annum (mtpa) for the first phase (two trains) and $1,000 per mtpa for subsequent phases (a third and/or fourth train). In comparison, Canadian East Coast projects incorporate capital costs of $950 to $1,000 per mtpa while Gulf Coast and U.S. West Coast projects are roughly $650 per mtpa and $1,000 to $1,100 per mtpa, respectively.

U.S. West Coast and Canadian East Coast projects benefit from less remote locations, allowing them to maintain better capital efficiencies than the Canadian West Coast projects, according to Peters.

Many of the Canadian East Coast export licence filings have targeted the Marcellus shale play in the northeast United States as a possible source of supply.

Three of the top projects in the East Coast are described here.

Bear Head LNG

Nova Scotia’s Bear Head LNG, which is being proposed by Australia’s Liquefied Natural Gas Ltd., could be one of the first – if not the first – to begin exporting LNG from Canada, with a planned in-service date of 2019.

Bear Head filed an updated registration document with Nova Scotia Environment (NSE). The company anticipates NSE approval of this update in the second quarter of this year. The NSE approval would be the last of the 10 initial federal, provincial and local regulatory approvals needed to construct an LNG export facility on the Strait of Canso in Nova Scotia.

Despite the project being located in Canada, the proponents filed an application with the U.S. Department of Energy (DOE) requesting authorization to export up to 440 billion cubic feet per year of U.S. natural gas to Canada, and up to eight million tonnes per annum of LNG from Canada to free trade agreement (FTA) and non-FTA nations.

“I do not think this is really a political issue per se,” said John Godbold, chief operating officer and project director for Bear Head LNG. “What we have said in the past, and I still believe it to be true, is that what is occurring is that the DOE is trying to determine how their process for U.S. projects fits with those in Canada. Secretary [Ernest Moniz] has even stated publicly that all projects will be treated the same.

“The other issue is how to bridge NAFTA [North American Free Trade Agreement] and the Natural Gas Act with any potential NEPA [National Environmental Policy Act] requirements. The latter is a difficult issue given that the Canadian projects do not have any NEPA approvals since they are permitted in Canada. The Bear Head DOE non-FTA application was the most robust LNG export application filed and did a good job of bridging these various regulations.”

In filing its 25-year export licence with the National Energy Board (NEB) last year, Bear Head LNG outlined potential sources of supply in Canada and the U.S., including the prolific Marcellus shale.

“We are planning for FID [final investment decision] in 2016,” Godbold said. “In support of this, Bear Head has already received nine of the 10 initial permits required for construction. The tenth is expected in Q2 of this year.”

Europe, India and other Asian markets are the main targets for LNG from Bear Head, he added.

“It is important to realize the shipping distances from Bear Head to other LNG markets globally. For example, the shipping distance to Malaysia from Bear Head is equal to that from British Columbia,” Godbold said.

Pieridae/Goldboro LNG

Pieridae Energy (Canada) Ltd. also filed an application with the NEB to import natural gas from the U.S. and to export it as LNG from a terminal near Goldboro, in Nova Scotia’s Guysborough County.

“We already have applied for [a] non-FTA licence and we have had no direct opposition to the [export] of gas from Canada,” said Alfred Sorensen, president and chief executive officer of Pieridae, who was previously president of Galveston LNG Inc., the parent company of Kitimat LNG before it was sold.

FID isn’t expected until 2016, and the company is targeting Europe as its main customer for the time being. In June 2013, it entered into a 20-year sales agreement with E.ON Global Commodities SE, a subsidiary of one of the world’s largest investor-owned power and gas companies, to deliver approximately five million tonnes per annum of LNG from Goldboro LNG to E.ON.

The project in 2014 received environmental approval from the Nova Scotia government.

Canaport LNG

Citing the strong growth in indigenous North American natural gas supply, Spanish company Repsol S.A. applied to the NEB to export gas from New Brunswick, where it currently operates the Canaport LNG regasification plant.

The company also is seeking regulatory approval to import gas from the U.S.

Repsol, which late last year announced the takeover of Talisman Energy Inc., has identified Western Canada and the northeastern U.S. as supply regions for the proposed liquefaction facility. The Talisman acquisition will add a land position in Western Canada and the Marcellus for Repsol.

In 2013, Repsol sold a set of LNG assets to Royal Dutch Shell PLC for $4.4 billion cash, but the deal excluded the Canaport LNG import facility, which reportedly failed to attract interest because booming North American gas production had eroded its value. The Canaport LNG regasification facility is a partnership between Repsol (75%) and Irving Oil Ltd. (25%).

The regasification facility received its first shipment of LNG in 2009.

Repsol is seeking to secure long-term feed gas supply for the LNG liquefaction project from Western Canada and/or the U.S. as the main supply regions.

– Canadian LNG Bulletin