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 But firms behind those proposals, such as Spanish oil giant Repsol
and Australia's Liquefied Natural Gas Ltd have one major hurdle to
clear: huge investments are needed to expand regional pipeline
capacity to feed them, and it is unclear who will pay.
"They have come at a rush over the last four or five months," said
analyst Mark Pinney, of the Canadian Association of Petroleum
Producers. "But these plants will need to get their act together
quickly, both at the supply and demand end."
The stakes are high. If successful, the projects would provide a
much-needed economic boost in Canada's Atlantic provinces, broaden
the market for plentiful North American gas, and shore up energy
security in parts of Europe.
It effectively means, however, tapping U.S. gas deposits that would
require investing billions of dollars in pipelines crossing New
England - a gas-starved U.S. northeast with a history of blocking
such investments on environmental grounds.
"The interstate pipeline companies are not going to construct
facilities unless they have firm commitments," said Thomas Kiley,
president of the Massachusetts-based Northeast Gas Association.
Together, the four projects proposed for New Brunswick and Nova
Scotia would take an estimated 1.5 trillion cubic feet of gas per
year - the equivalent of three weeks' worth of U.S. consumption -
liquefy it, and ship it abroad in tankers from Canada's rocky coast.
The geography makes sense. The voyage from Eastern Canada to Europe
is about four days shorter than from the U.S. Gulf Coast, where a
cluster of competing terminals has been proposed, and is also
quicker than from U.S. East Coast ports.
"Our advantage is location and wide community acceptance," said Mark
Brown, project director with privately-owned Pieridae Energy, Ltd,
which has secured environmental permits for its proposed $10 billion
terminal in Nova Scotia.
Slumping energy prices made shipping North America's LNG to Asia
unprofitable in recent months, but projects targeting Europe look
still viable, in part because of uncertainty about supplies from
Russia because of the Ukraine crisis.
EUROPEAN DEMAND
Pieridae, for example, said it has signed a 20-year contract to sell
5 million tons of gas per year to Germany’s E.ON, the largest of
many European utilities looking to cut dependence on Russia.
The problem is a lack of local supply. Quebec, Newfoundland and
Labrador, and Nova Scotia have all imposed various forms of
moratoriums on hydraulic fracturing - a process required to access
shale gas deposits - over concerns about the potential impact on
ground water. New Brunswick, which has one of the thickest shale gas
reservoirs in North America, is poised to do the same.
With Nova Scotia’s offshore fields in decline, that leaves the vast
Marcellus shale gas deposit beneath Pennsylvania, Ohio and West
Virginia as the next most viable source. That, however, would
require expanding or building new pipelines going through New
England states that have opposed new energy infrastructure in the
past.
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"From a Canadian perspective, we look at it, and we think, ‘Hmm,
where’s the gas going to come from to fill all these plants?’" says
Pinney.
Officials at the companies have declined to detail their plans for
securing supply, with Repsol - the company pushing the largest
project - saying the question is still under review.
NEW ENGLAND BOTTLENECK
Spectra Energy’s Maritimes and Northeast pipeline is Atlantic
Canada's main connection to Marcellus gas. The 889-mile (1430
kilometer) pipe now runs north to south with a capacity of 304
billion cubic feet of gas per year and the company has announced
plans to start pumping the other way and add capacity.
But natural gas fuels half the electricity generated in New England,
and any export would vie for precious space in its already
constrained pipeline network. "I wouldn’t say it’s a slam dunk,"
said Spectra spokesman Steve Rankin.
New England's pipeline capacity shortfalls sometimes climb to 1-2
billion cubic feet on the coldest winter days, triggering spikes in
electricity costs and factory shutdowns. The four new eastern
Canadian plants would require nearly twice the region's current
annual consumption of natural gas.
"It just doesn’t make sense to build over-sized infrastructure,
potentially at a cost to ratepayers, only to have some portion of
that exported," said Greg Cunningham, an attorney with the
Boston-based Conservation Law Foundation.
But Morningstar analyst Jordan Grimes says New England's pipeline
bottlenecks may be an opportunity in disguise for Eastern Canada's
gas projects.
"If pipeline companies expand capacity to solve the constraint
problems in New England, you are going to have a lot of excess
capacity during the nine months of the year that are not winter," he
said. "That is where an LNG export facility can come in."
(Additional reporting and editing by Richard Valdmanis; Editing by
Tomasz Janowski)
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