Canadian LNG Exports

Written By Brianna Panzica

Posted October 26, 2012

Canada is joining the race to export LNG.

On Wednesday, our northern neighbor announced plans for a new LNG facility in Goldboro, Nova Scotia.

The $5 billion East Coast facility will aim to ship liquefied natural gas to customers in Europe and India, taking advantage of the high demand for low-priced North American natural gas.

Pieridae Energy Canada, the company involved in the project, hopes to complete negotiations with utilities and natural gas companies by next year, allowing the company to begin construction in 2014 and have the facility online by 2018.

From the Chronicle Herald:

“Goldboro provides an excellent location for exports and will be the east coast of Canada and the United States’ closest mainland LNG terminal to Europe and India,” said Alfred Sorensen, president of project proponent Pieridae Energy Canada.

“It’s going to happen because the market wants it to happen.”

Demand for U.S. and Canadian natural gas is high abroad; while in the U.S., we pay around $3 per mmBtu for natural gas, in parts of Europe natural gas can cost as much as $11.

The demand is even higher in Asian nations like Japan, where the resource can cost $16 per mmBtu.

But this Canadian company is not the first to try to export the abundant resource. U.S. company Cheniere Energy (NYSE: LNG) has been approved to build an export facility as well at Sabine Pass, Louisiana.

The Canadian facility plans to combine natural gas from different areas of North America. Sorensen has indicated that 33 percent would come from the U.S., 33 percent from onshore Eastern Canada, and the remainder from offshore.

It will have the capacity to store 420,000 cubic meters (14.8 million cubic feet) of natural gas, and the gas will come from companies like Contact Exploration Inc. (CVE: CEX), with which Pieridae is currently in talks.

The company has also been talking with the owner of the Maritimes & Northeast Pipeline, stretching from Sable Island to Goldboro to Massachusetts. Sorensen would like the facility to connect with the 1,400-kilometer (870-mile) pipeline.

From the Sacramento Bee:

“A Goldboro LNG export terminal will greatly contribute to our world-class oil and gas sector and position in Nova Scotia as a strategic energy exporter,” said Darrell Dexter, Premier of Nova Scotia. “This investment in our province will mean more good jobs for Nova Scotians and a boost to the economy throughout Atlantic Canada.”

At peak construction, Pieridae has indicated that the facility will create 1,500 construction jobs. Once it’s in operation, it will require at least 100 full-time employees.

But a number of obstacles still block the way for this breakthrough project. Pieridae has just started contract talks, and in order to make the facility profitable, it will need to lock in a number of contracts before construction begins.

And, as the Globe and Mail indicates, it will also require Pieridae’s exports to keep in line with the low prices international customers are expecting. While in North America natural gas has fallen in price, the cost of exporting the resource could push the price right back up – something that could quickly turn customers away.

But if Pieridae is able to justify the high cost of the plant with new contracts and keep the cost of the gas low, it will be successful in one of the first North American LNG export ventures.

That’s all for now,

Brianna Panzica

follow basic@brianna_panzica on Twitter

Energy & Capital’s modern energy guru, Brianna digs deep into the industry with accurate and insightful updates into the biggest energy companies and events. She stays up to date with the latest market moves and industry finds, bringing readers a unique view of current energy trends.

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