More than just pipe dreams
Region has LNG advantages, but must adapt to needs of rapidly changing industry
By JUDY MYRDEN Business Reporter
thechronicleherald.ca
Nova Scotia has two players fighting for a share of the LNG jackpot.
The goal: a Nova Scotia terminal to process imported liquefied natural gas to supply the energy-hungry North American market.
The payoff: thousands of short-term construction jobs and the chance to re-energize the province’s flagging energy sector.
But Atlantic Canada has limited time in which to seize first place in the race to bring LNG to North America, says Angela Tu Weissenberger, the Calgary editor of Energy Politics, a British journal.
The region has several competitive advantages: ports close to the U.S. northeast; a pipeline running from Nova Scotia to the U.S.; and local support for LNG projects.
But the global situation is constantly changing, Ms. Tu Weissenberger says in a January report she prepared for Halifax’s Atlantic Institute for Market Studies.
"With more than 55 terminals currently under proposal in North America, 10 of them in the U.S. northeast, Atlantic Canada has only a fleeting window of opportunity to gain a share of the LNG market," she says.
"Even though some U.S. projects currently face fierce local opposition, attitudes might change over time through persistence, technological changes, resources, price volatility and regulatory evolution."
And change is exactly what has happened in the Nova Scotia situation over the past year.
Anadarko Petroleum’s plans to build an LNG terminal in Cape Breton show signs of stalling. The Houston oil and gas giant called its own time out last month after it was unable to find a supply of gas after looking around the world for the past year. Available natural gas from Trinidad, Algeria and Nigeria is heading to western Europe, where there is strong demand and higher returns.
While the Houston firm’s project is in idle, a privately owned Halifax company continues to push forward with its $4-billion LNG and petrochemical project on the Eastern Shore.
Keltic Petrochemical plans to develop, build and operate a petrochemical plant in Goldboro. The first of its kind in Atlantic Canada, it is expected to create 3,000 jobs during construction and 500 full-time jobs and to be in operation by 2010.
Keltic’s plan, which has been in the works for the past six years, involves bringing in liquefied natural gas by tanker to supply the petrochemical operation. The firm also plans to build a cogeneration power plant and a new access highway.
Keltic must still get necessary permits and government approvals to proceed.
Calgary energy analyst Chris Theal says Keltic was wise to plan a combined LNG and petrochemicals facility because the company won’t be not pinning its hopes on just the LNG side of the equation.
In fact, he says, Keltic has obviously taken the lead over Anadarko with the recent announcement that it has secured a deal with two European companies in which it will receive a supply of gas for the petrochemical plant in exchange for turning over development and control of the LNG regasification plant.
"I think you have a very clear picture of what the LNG market looks like today in Eastern Canada," says Mr. Theal, an energy analyst with Tristone Capital.
Paul McEachern, head of the 500-member Offshore / Onshore Technology Association of Nova Scotia, says all eyes are on Nova Scotia’s LNG projects in the hopes of reviving an energy industry hard hit by the downturn in offshore activity.
Building huge liquefied natural gas regasification terminals in Nova Scotia would also mean a boom in employment for the province’s thousands of construction workers, many of whom are heading to Alberta to find work, he says.
"In the short-term, it takes up the slack of construction capability. It will boost the GDP," he says.
Also importing gas from countries like Russia, Qatar, and Algeria and "putting more product" into the Sable gas pipeline will reduce the cost of delivering the gas into the U.S. markets, says Mr. McEachern.
The Nova Scotia projects must also keep an eye on the competition looming in New Brunswick, where Irving Oil and Spain’s largest oil company, Repsol, have teamed up to build a $750-million LNG terminal outside of Saint John and have received all the necessary approvals.
Mr. Theal says the Atlantic region can only sustain two terminals because the pipeline on the U.S. side has limited capacity and could not handle the amount of gas being supplied by three regasification terminals.
Anadarko’s project started with much fanfare in the summer of 2004, when its executives announced their intention to build a $450-million regasification terminal at Bear Head, 10 kilometres from Port Hawkesbury. Gas was to be imported, then fed into the Maritimes and Northeast pipeline, which serves the Sable project.
Shipments were expected to begin in 2008, and plans called for the Bear Head facility to supply enough natural gas to heat nearly 12,000 homes for a year.
But the price tag on the project has since increased to $750 million US, the in-service date has been delayed, and construction planned for this year has been cancelled until Anadarko secures a long-term gas contract.
Mr. McEachern is optimistic both of the proposed Nova Scotia projects will proceed. That’s because Keltic has a supply of gas to fuel both the LNG regasification terminal and provide the feedstock to make plastics at its petrochemical plant, and Anadarko has received crucial environmental permits allowing a LNG terminal to be built on its 72-hectare site, he says.
"Having a permitted LNG site is as rare as hen’s teeth," he says.
( jmyrden@herald.ca) |
