Energy Viability of facility, said to be planned for Saint John, hinges on availability of natural gas

FREDERICTON • The viability of a multibillion-dollar LNG export terminal in Saint John hinges on the availability of a natural gas supply, says the president of Atlantica Centre for Energy.

A Bloomberg News report, citing an unnamed source, says that Repsol is considering building a US$2-billion plant in the Port City to export natural gas, as Europe seeks to reduce its dependence on Russia for the fuel.

Spain’s biggest energy company would erect the facility at its existing Canaport LNG plant, which was designed to import liquefied natural gas but is currently underused.

Repsol may include the export project when updating its strategic plan next year, according to a Bloomberg report.

“The key is supply,” said Colleen Mitchell, president of Atlantica Centre for Energy. “Whether it’s export terminals that are proposed for Nova Scotia or New Brunswick, it really comes down to having a stable, long-term supply of natural gas.

“Whether these investors and companies can secure that supply would really be the first that they are looking at.”

Mitchell said there are three potential sources – indigenous offshore supply, the development of onshore supply or importing natural gas from the United States via pipeline.

“Any of those three scenarios for creating supply are all possible,” she said. “It’s a matter of whether all of them proceed or a combination, but it will be interesting over the next four to five years to see which ones do come to fruition, which do have market viability, and which ones come into production”

Energy Minister Craig Leonard said on Wednesday that the Tory government has been keenly aware of Repsol’s interest.

“We have been hearing a lot of different ideas and plans, ”Leonard said. “There has been plenty of discussion about it over the last couple years with the markets, the way they have been, the underutilization at Canaport.”

The facility has been underutilized after the rise in shale supplies throughout North

LNG imports to Canaport over the first 11 months of last year were 67 per cent lower than over the same period in 2010, according to data from Canada’s National Energy Board.

U.S. imports of Canadian gas by pipeline fell 22 per cent in 2013 from five years earlier, according to data from the U.S. Energy Information Administration, as the largest consumer of Canadian gas meets more of its own demand.

Leonard pointed out that the provincial government gave Canaport environmental approval last year to begin exporting liquid natural gas at its existing facility.

“They do have some small export capability there and so obviously at that point we knew they were looking at the export potential,” Leonard said. “From the discussion we have had across North America, over in India, LNG export is going to be an incredibly rapidly growing sector in the world energy markets.

“Certainly we have got a great potential here with a facility where a lot of the infrastructure is already in place.”

Leonard said Repsol’s potential plan speaks to the “great potential” that New Brunswick has to develop its own domestic natural gas.

“Obviously if we have one of the few facilities in North America that would be exporting in the next number of years, the opportunities would be immense,” he said.

Corridor Resources will spend $25 million this summer to further develop its shale gas reserves in New Brunswick and is close to moving on a $150-million project that would see the company drill a series of new wells in an effort to bring its operations to full commercialization.

The summer program will provide pivotal data as to whether Corridor’s shale gas development in New Brunswick will begin to rapidly expand.

Corridor itself has identified the potential of 67 trillion cubic feet of resources in the Sussex and Elgin.

“That’s world class,” said Corridor Resources president and CEO Phillip Knoll in a recent editorial board meeting with Brunswick News, saying that Corridor’s play alone, if commercially viable, is enough to meet New Brunswick’s entire natural gas needs as well as warrant an LNG export terminal.

“Where you have a group of natural resources getting together like potash and minerals, oil and gas – when you have all these things in one confluence, you are able to build manufacturing facilities around them like fertilizer plants, up-graders, LNG export facilities,” he said. “All of this can happen right here.”

Liberal energy critic Rick Doucet said on Wednesday that he doesn’t believe an export facility would be contingent on the development of shale gas in New Brunswick.

“I welcome this kind of news, it’s good news for New Brunswick,” Doucet said. “It is certainly going to lead to enhanced opportunities for New Brunswickers.”

He then added “I don’t think that (the plan would be contingent on indigenous supply), I doubt that very much. I think what they are doing is looking at what is happening with the world supply and the North American market to feed the plant.”

The crisis in Ukraine more than 6,000 kilometres away may help Repsol justify investing more at the Canaport facility.

The Group of Seven nations has agreed to find new sources of energy to prevent Russia from using its oil and gas reserves as a “political weapon,” German Economy and Energy Minister Sigmar Gabriel said earlier this month.

Russia under President Vladimir Putin provides about one-third of the European Union’s oil and gas needs, mainly via state-controlled Gazprom OAO and Rosneft OAO through pipelines that cross Ukraine.

In North America, the explosion of supplies from shale fields is turning the continent from an importer into an exporter.

Repsol declined to comment on its plans for Canaport.

Mitchell said she sees Repsol’s interest in an export terminal, maintaining that energy companies will take a long-term view in its decision making that will also highly revolve around securing supply.

“It’s completely up to private investors as to what level of investment that they want to make and what their long term perspective is”, she said. “Certainly, because energy projects do take years to finance and to permit and to build and construct before they actually come into operation, you do need to be looking out four to five years.

“I think that companies are looking at all their options and certainly this would be an option for them”

She added: “But I would emphasize that an export of LNG from the Atlantic region really has to nail down and secure long-term stable supply.”

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