Partnership courts Gazprom for Quebec LNG plant ....................................
globeinvestor.com
SHAWN MCCARTHY
00:00 EDT Thursday, May 24, 2007
Petro-Canada's bid to become a partner with Russia's OAO Gazprom in the development of North American LNG markets has run up against a Canadian competitor.
Rabaska LNG is in negotiations to buy gas from Gazprom's Baltic liquefied natural gas plant in a deal that could see Gazprom taking an ownership stake in Rabaska's proposed $840-million LNG project, to be built across the St. Lawrence River from Quebec City.
In an interview yesterday, Rabaska chief executive officer Glenn Kelly said his company is on a short list of prospective buyers that would enter long-term contracts to take liquefied natural gas from Gazprom's planned Baltic facility, near St. Petersburg.
"We are in serious discussions with a number of potential gas suppliers, including Gazprom, for LNG supply," Mr. Kelly said. "Gazprom has confirmed to us that we are on a very, very short list of terminals where they would like to send their LNG."
Rabaska is a partnership of Montreal's Gaz Métro LP, Alberta-based Enbridge Inc. and the French energy company Gaz de France. It is one of dozens of energy companies that are planning to build LNG terminals around North America to offset expected declines in conventional natural gas production in both the United States and Canada. But there are more buyers of liquefied natural gas in the world than there are sellers, and the analysts have raised doubts about the viability of many of the projects, based on lack of assured gas supply.
Petrocan and its partner, TransCanada Corp., are planning to build an LNG terminal farther down the St. Lawrence at Gros-Cacouna, Que., and Petrocan has been engaged in long-running negotiations with Gazprom to participate in the Baltic project in order to secure a steady supply of gas.
In return, Gazprom is demanding a stake in the Gros-Cacouna plant; Gazprom executives have said any partner in the Baltic should expect to either sell it downstream assets or allow it to become a partner in projects.
But analyst Elena Herold of PFC Energy said any company that is counting on Gazprom's Baltic project for LNG supplies could well be disappointed. "It's ridiculous - more talk than a real project," said Ms. Herold, who covers Russian energy for the Washington-based consultants.
Ms. Herold said Gazprom has no dedicated natural gas supply to feed the Baltic project, and that it makes more sense to ship the gas by pipeline to Europe than liquefy it and send it by tanker to North America. As well, she said Gazprom - despite huge reserves in the ground - is facing a period of declining gas production when it will be difficult to satisfy existing customers, let alone supply new ones.
Mr. Kelly, who was in Moscow last week, said he was assured Gazprom would meet all its commitments, and is keen to proceed with the Baltic LNG project in order to open new markets in North America.
However, he added that, unlike Petrocan, Rabaska is not looking to be a partner in the Baltic project.
Gazprom has said that it hopes to have the Baltic plant operational by 2011, the same year that Rabaska expects to begin operations at its 500,000-cubic-feet-a-day terminal, which would re-gasify the liquid natural gas and then ship it to markets primarily in Ontario and Quebec.
Having received a positive assessment from Transport Canada regarding its shipping plans, Rabaska is now awaiting a report from a federal-provincial environmental assessment panel in the coming weeks.
Mr. Kelly said he was bound by a confidentiality agreement not to discuss the specifics of any potential deal with Gazprom, including whether the Russian company would take an equity stake in the Rabaska plant to be located in Lévis, Que.
"I would say generally that all or most LNG suppliers want to be involved right into the market and are doing away with any middlemen in the chain. And I would say Gazprom is interested in the Canadian market per se," he said.
Gazprom has said it wants to expand operations into the downstream side of the business in key markets by buying foreign assets. The Russian firm has a 30-year history of supplying natural gas to Gaz de France and recently agreed to extend co-operation in LNG and to swap assets so that Gazprom could enter the French market directly. |
