Canada lags U.S. in LNG export race
Having already lost the race to sell liquefied natural gas across the Pacific to energy-hungry Asian economies, Canada is now falling further behind in the race to sell LNG across the Atlantic as well.
Earlier this week, the United States announced a tentative deal with the European Union to avert a full-blown trade war. Part of that detail-light agreement involved a European commitment to purchase more American LNG, suggesting the two multibillion-dollar LNG export facilities in development on Canada’s east coast are facing another challenge from potential buyers.
“It would be hard to argue that the U.S. facilities are not better prepared [than those in Canada] to supply LNG to Europe,” Ed Kallio, principal at Eau Claire Energy Advisory, told BNN Bloomberg via email. “The U.S. projects are up and running and more are coming [while] Canada’s eastern projects remain essentially theoretical.”
Calgary-based Pieridae Energy (PEA.V) is furthest along with its Goldboro LNG project on the Nova Scotian coast. The roughly US$7.5-billion plan to export up to 10 million tonnes of LNG per year is expected to face a final investment decision this year and Pieridae CEO Alfred Sorensen argues the U.S.-E.U. deal actually improves Goldboro’s prospects.
“Anything that encourages the Europeans to buy more from North America is actually a good thing for us,” Sorensen told BNN Bloomberg via telephone. “Even last year there was basically no interest.”
Pieridae already has half of its capacity reserved for sale to German utility Uniper and Sorensen says the company should be ready to announce a supply deal with another major European utility in August.
Yet Goldboro is not expected to be operational until the end of 2022, roughly a year later than the last time Sorensen spoke to BNN Bloomberg in January. America, meanwhile, already has one LNG export facility selling gas to Europe from the Louisiana coast and another five are under construction.
“Pieridae does have that deal to supply a German utility, but they have no gas connected nor steel in the ground,” Kallio said.
The solution Sorensen is counting on comes from Calgary-based TransCanada. The pipeline builder was planning to convert one third of its namesake natural gas mainline to crude oil service in what was once known as Energy East. With that project now defunct, Sorensen argues Pierdae will have an easier time getting western Canadian natural gas delivered to the east coast.
The problem with that plan, Kallio counters, is western Canadian gas costs too much for Goldboro to be globally competitive.
“The Canada east coast projects need access to low-cost Appalachia gas in order to compete with the U.S. projects,” Kallio said. “And that seems to be some distance away.”
Expanding European-to-east-coast gas price differentials do improve the economic case for shipping LNG from Canada’s east across the Atlantic, Kallio argues.
“That could cause some optimisim and even a [final investment decision],” he said, “but I’m not holding my breath.”