In The NewsGOLDBORO PROJECT WOULD CREATE DEMAND FOR WESTERN CANADIAN GAS: PIERIDAE EXEC

May 30, 2019

GOLDBORO PROJECT WOULD CREATE DEMAND FOR WESTERN CANADIAN GAS: PIERIDAE EXEC
By Jim Bentein Daily Oil Bulletin Friday, May 17, 2019, 7:56 AM MDT

Alberta natural gas producers should be hoping for a go-ahead for the Goldboro LNG export plant proposed for a site in Nova Scotia, says an executive with the company building it, since it would create a demand for their gas.

Martin Belanger, senior vice-president of project developer Pieridae Energy Limited, said although the company will control its own gas production, it will need other supplies.

With total development costs for natural gas production and the liquefaction facility expected to reach $10 billion, the Goldboro LNG facility will produce 10 million tonnes per year of LNG at its site in Goldboro, Nova Scotia, northeast of Halifax.

Last August Pieridae, which has offices in Calgary and Halifax, acquired Calgary-based Ikkuma Resources Corp., which controls extensive producing and gas-prone reserves located primarily in the central Alberta Foothills.

Belanger, speaking at a luncheon organized by the Petroleum Joint Venture Association (PJVA), said the decline of gas production at Sable Island and other offshore Nova Scotia locations makes it essential that the company access its gas from Alberta.

He said this represents a significant opportunity for Alberta gas producers, many of whom will not have an opportunity to capitalize on LNG development in British Columbia, where the giant Royal Dutch Shell plc-led LNG Canada plant is already under construction and other plants are expected to proceed.

“We want to control the gas from Alberta [which is why it bought Ikkuma],” Belanger said. “Alberta gas will have a huge presence [and] we’ll likely process other people’s gas.”

He said Ikkuma now produces 100 mmcf/d and “we can get to 400 or 500 mmcf/d” so it will need to secure other supplies.

Pieridae’s plant, unlike those on Canada’s West Coast, which are aimed at exports to Asia, is being designed to transport LNG to Europe and possibly India and elsewhere.

In 2013, the company finalized a 20-year agreement to sell five million tonnes per year of LNG to German-based utility and energy company Uniper Global Commodities SE.

Belanger said that initial contract was the key to the go ahead for the plant.

“You have to have a customer,” he said. “You have to have a 20-year customer.” Over the length of the contract it will be worth more than US$35 billion, he added.

The deal was backstopped through a US$3 billion loan guarantee from the German government, with a subsequent approval for a US$1.5 billion loan guarantee, which helped finance the takeover of Ikkuma.

Belanger said there is a large market for LNG in Europe, which Alberta gas producers will tap when the Goldboro project proceeds.

He said the Germans’ decision to phase out coal-burning power and replace it with renewables “is not going well” leaving them with the option of clean-burning gas.

“That’s good news for us,” he said, alluding to Pieridae and gas producers overall.

He said Pieridae, with a total of just 22 employees now, is making great strides in bringing its project to fruition, despite a number of setbacks, including the lack of a local gas supply option in Nova Scotia. The plant was originally aimed at accessing that source of gas.

Belanger said the Goldboro project, which has been viewed with some skepticism by analysts and other observers, has many competitive advantages over LNG plants on the U.S. Gulf Coast and the Canadian West Coast.

To begin with, it can take advantage of an existing pipeline network that can transport Alberta gas to the Maritimes.

“The pieces are there for us,” he said.

He said the company wants to repurpose the existing Maritimes and Northeast Pipeline (M&NP), which was originally designed to move gas from offshore Nova Scotia to the Maritimes and New England, so that it can import gas from Alberta. That gas would travel through the network of pipelines controlled by TransCanada Pipelines Ltd. (TCPL) and Enbridge Inc., including TCPL’s mainline and pipelines in the U.S.

Belanger said his company is in negotiations with both Enbridge and TCPL and is optimistic a deal will be made to move western Canadian gas through that pipeline network.

All the environmental and other required permits are in place for the project, he said.

Belanger said the company, which recently engaged global engineering firm Kellogg Brown & Root Limited (KBR) to perform a review of an amended version of the previously prepared front-end engineering and design for the plant, said it is taking a “cookie-cutter” approach to the plant’s construction, with the use of 20 modules that would be built in China.

He said the ongoing trade war between the U.S. and China, as well as disputes between Canada and China, have made him edgy about the contracts to build those components, but he remains hopeful the work will be completed.

Belanger added that, aside from the fact “we don’t have to build a pipeline,” Pieridae believes it is cheaper to build a plant in the Maritimes than in B.C. because of a readily available workforce. It’s also a better location than the Gulf Coast, since it is not hurricane-prone and it is several days closer to Europe.

He said the company is now completing a final cost estimate for the plant and is arranging final financing.

It would then have to reach a decision about whether it builds two trains at once or one, followed by the second at a future date.

The project would create 3,500 peak construction jobs and 220 direct jobs in Nova Scotia once it is in operation.

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