In the global race to power up LNG plants, firms face supply challenge
N.S.'s Bear Head LNG project has cost $80M so far, with no contract in sight for gas
canadaeast.com
(Via Bloomberg News)
A tanker is loaded with liquid natural gas at the Bontang LNG terminal in the port near East Kalimantan, Indonesia, in this file photo. Energy companies are building similar terminals in New Brunswick and Nova Scotia but only two of them have publicly confirmed they have secure supply contracts.
By Nina Chiarelli
Telegraph-Journal
The race is on to lock down secure and long-term supplies of liquefied natural gas for dozens of proposed LNG plants across North America.
The three LNG projects in New Brunswick and Nova Scotia are well into development even though only two of the projects have publicly confirmed secure supply contracts of natural gas.
Anadarko Petroleum's Bear Head LNG project in Point Tupper, N.S. is still without a firm contract for supply of natural gas even though the company has spent $80 million so far - prompting questions from analysts about the future of the plant.
Bob Daniels, vice-president of exploration and production for the Houston-based company, told analysts in a conference call this week that his company is still doing what it can to secure a supply.
"We've been working the supply options as far as we can. We still have a couple that we're moving forward with, but it has been slower than we anticipated, no doubt about that," he said.
The region's two competing projects have both already outlined supply contracts. Irving Oil partnered with Repsol YPF, the Spanish oil giant with oil fields across Latin America, while Halifax's Keltic Petrochemicals Inc. has partnered with Dutch oil giant Petroplus International B.V.
However, there are as many as 60 projects currently in various stages around North America.
"For many proposed projects, what remains to be seen is the nature of the supply contracts they are able to obtain," said Angela Tu Weissenberger, a natural gas analyst in Calgary. "Short-term contracts might have to suffice until long-term supply commitments are awarded."
Few new natural gas producing plants are being constructed anywhere in the world without long-term contracts for product and destination re-gasification plants in mind, despite countless analyses predicting a surge in demand for LNG.
Even Anadarko CEO James Hackett had to try to mollify analysts on how much the company would spend on its LNG project without a secure contract in place.
"If we don't find an upstream solution in a reasonable period of time we'll look at how we can monetize things," he said. "So, be assured we're not going to let this drag on forever."
In the meantime, both Irving Oil and Keltic Petrochemicals are pushing ahead with their respective projects.
Kevin Dunn, CEO of Keltic, said the company is waiting for a response to regulatory submissions by month end and expects to reveal more of its confidential, multi-year supply agreement with Petroplus after March 15.
"We think it's going really good. But you never want to brag about something because tomorrow it could change," he said.
The Energy Information Administration has estimated world trade of liquefied natural gas will climb to 18 per cent of natural gas consumption by 2020, so whichever company gets to market first will definitely enjoy benefits.
Ms. Tu Weissenberg called it the "first mover" benefit.
"In a growing natural gas market with initially limited supplies, those who can capture market share early will enjoy higher prices, more profitable customers, and potential economies of scale from a well-established presence," she said.
In a report for the Atlantic Institute of Market Studies, Ms. Tu Weissenberger said the Maritimes offers several competitive advantages to move the gas, including accessibility to ports, a proximity to the high-priced northeast American market, and pipeline infrastructure.
Her report calls facilities such as Anadarko's Bear Heard project "merchant terminals" - or ones built without supply or end-user contracts.
"Few project sponsors have attempted this business model because of the revenue risk associated with unpredictable volumes," she said.
At Irving Oil, construction continues on its eastside Saint John Canaport LNG terminal.
Spokeswoman Jennifer Parker declined to comment on the company's contract with Repsol, other than to confirm Repsol will deliver LNG from one of its natural gas fields worldwide. |
