An aerial view of Irving Oil's Canaport Marine Terminal near Saint John, New Brunswick, on Aug. 27, 2013.Christinne Muschi/The Globe and Mail
In the race to build terminals to ship liquefied natural gas from Canada’s East Coast to an increasingly desperate and lucrative European market, no proposal may be closer to reality than one focused on an underused port on New Brunswick’s Bay of Fundy.
Repsol, the Spanish oil and gas giant, is once again evaluating what it would take to convert its Saint John LNG import terminal – the only operational one in Canada – into an export facility that could ship gas across the Atlantic. It’s estimated that such a conversion, which would include the construction of a liquefaction plant to chill the gas, could cost several billion dollars.
There are other challenges, such as securing a source of gas, since Atlantic Canada is years away from producing its own reliable supply. Repsol would need to find a supplier, most likely in either Pennsylvania or Alberta, then expand the existing pipeline network.
But industry observers say that, given the high costs, inevitable regulatory delays and time required to build new LNG plants, the Saint John facility may be further ahead than any other potential LNG export project in Canada.
“The infrastructure is already there,” said Paul Barnes, Atlantic Canada and Arctic director for the Canadian Association of Petroleum Producers (CAPP). “They just need a buyer and a seller for the gas, and then it’s just connecting the two.”
There are logistical issues, of course, if Repsol wants to reverse the flow of the Brunswick Pipeline, which currently carries natural gas from Saint John to the U.S. Northeast. But the evolving economics of natural gas are making just such a proposal increasingly appealing; prices for gas in North America are a fraction of those in Europe, where countries are trying to find alternatives to the Russian supply because of its invasion of Ukraine.
“It really comes down to getting the project financed in a way that removes the risk,” said Todd McDonald, the president of Energy Atlantica, a Halifax-based gas trading company. “And that comes down to Europe’s willingness to sign long-term fixed-price contracts.”
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A long-term contract, Mr. McDonald said, would eliminate the volatility of natural gas costs and give Repsol the certainty it needs to invest in the project. In 2015, the Madrid-based company put forward a proposal to convert the Saint John terminal, formerly known as Canaport, into an export facility, but the plan was shelved when the price of gas plunged again.
At the time, the company said it would use gas from the U.S. Northeast and deposits in Western Canada, for a total of 785 million cubic feet a day, according to filings with the National Energy Board. With natural gas prices this spring in Europe reaching 10 times those in Alberta, that plan is now much more commercially viable, Mr. McDonald said.
Exporting natural gas would provide a second life to Repsol’s facility, which started importing LNG in 2009. The terminal opened just as shale gas was being discovered in the United States, and the boom in domestic production severely undermined the company’s plans to supply New England with gas from overseas.
Because of the cheap, abundant supply of U.S. gas now available, the Saint John terminal is only used for a few busy days in the winter when demand spikes and there’s a market for foreign LNG. The facility, which mostly imports gas from Trinidad and Peru, is dormant the rest of the time.
“For most of the year, it’s a stranded asset,” Mr. McDonald said. “They built that facility on pure speculation, thinking, ‘We’ll bring gas into North America and make lots of money.’ So I think they’re a little bit gun shy.”
Repsol bought out Irving Oil’s remaining share of the terminal in November, a move it said gives it complete control over the facility’s future. The company said it was considering all options to expand use of the terminal, which has the capacity to ship 1.2 billion cubic feet of natural gas a day, but declined to comment further.
“Repsol is continuously exploring options to maximize the value of the terminal, with a particular focus on new lower-carbon opportunities to help meet market demand and to support the energy transition. The company will look at any and all business that enhances or creates value at Saint John LNG,” spokesman Mike Blackier said in an e-mail.
Repsol’s rivals are also exploring new ways to build LNG export facilities in Canada that would serve the European market. In Nova Scotia, Calgary-based Pieridae Energy says it’s looking at building a floating LNG facility that would allow it revive a plan to import gas from Alberta, process it in Goldboro, N.S., and export it to Germany.
Last summer, Pieridae announced its proposed $13-billion, land-based LNG project in Nova Scotia would not proceed because of cost pressures and problems securing financing. Interest in the Goldboro facility has increased significantly in recent months, however, because of the situation in Europe.
“The irony is, had that project been under way today, they would have been billions and billions of dollars in the money,” Mr. McDonald said.
Unlike Repsol, Pieridae already has the supply – from its own gas-producing assets in the foothills of Alberta’s Rocky Mountains – but doesn’t have the LNG facility yet.
On the West Coast, Shell PLC SHEL-N is also studying a potential expansion for its LNG Canada joint venture in British Columbia, eyeing a surge in global demand for reliable supplies of liquefied natural gas. While Canada had 18 proposed LNG export terminals just a few years ago, according to federal data, the Shell project is the only one under construction.
In Newfoundland and Labrador, meanwhile, a plan to tap into the province’s abundant supply of offshore natural gas is still years away from completion. The LNG Newfoundland and Labrador project, not expected to begin production until 2030 if approved, would carry gas from the Grand Banks through an underwater pipeline, convert it into liquefied natural gas, then export it to Europe.
Small pockets of natural gas have also been discovered in New Brunswick and Nova Scotia. But while companies have long eyed a potential market for that gas in Europe, both provinces currently have a moratorium on fracking that prevents those resources from being developed.
“The idea of exporting LNG out of Atlantic Canada is certainly not new,” CAPP’s Mr. Barnes said. “But it’s definitely getting heightened interest right now.”
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