Financial Post - Pieridae Energy Close to Proceeding with $10-billion LNG Project in Nova Scotia Next Month

CALGARY – While much of the Canadian oilpatch is waiting for a decision on an LNG project on the West Coast, Pieridae Energy Ltd. is on track to green light its $10-billion Goldboro LNG project in Nova Scotia as soon as next month.

“The next couple of weeks will be critical for the project,” Pieridae CEO Alfred Sorensen told the Financial Post, adding that he’s expecting a construction permit from Nova Scotia’s government and finalized agreements with contractors by the end of August.

In addition, Sorensen said Pieridae is close to signing a deal to merge with an Alberta-based natural gas producer, which would given Pieridae natural gas supply for its Goldboro LNG export facility.

Once the construction permit, contractor agreements and merger is announced, the company is planning to begin construction by the end of the year on the $10-billion terminal 150 kilometres northeast of Halifax, where natural gas from southern Alberta would be chilled until it reaches its liquid state before shipping the product to a utility company in Germany.

The construction start date could make Goldboro LNG the first project of its kind in Canada to reach the milestone after a series of delays and project cancellations at LNG project planned for British Columbia’s coast.

Combined with the potential Royal Dutch Shell Plc-led $40-billion LNG Canada project on the West Coast, the Goldboro LNG project would boost natural gas prices in Canada and lift the gas sector, which has been hampered by years of persistently low commodity prices, National Bank Financial analysts Greg Colman, Patrick Kenny and Dan Payne said in a research note this week titled ‘The Little LNG Project that Could’.

“While perhaps lacking in notoriety relative to its West Coast counterparts, Pieridae’s proposed Goldboro LNG project is well positioned with most of the supporting pipeline and significant funding already in place,” they wrote, adding that a final investment decision is expected by the end of the year.

Even though Pieridae doesn’t have the resources of global super-major Shell, Sorensen said the company still believes it can secure funding for its project and that it can transform into an integrated energy company.

“What we want Pieridae to be when the process is finished is (an integrated) natural gas company that monetizes its natural gas through the LNG market,” he said.

Earlier this year, Pieridae announced it had hired Morgan Stanley & Co and SG Americas Seucrities as advisers on the project to assist in securing financing. The company also has loan guarantees from Germany and Italy and the project may also secure loan guarantees from other European countries.

Calgary-based Pieridae has been attempting to integrate with upstream producer through other mergers. It purchased a publicly traded natural gas company last year, buying tiny Quebec City-based Petrolia Inc., in a reverse-takeover to go public and raise its investor profile.

At the time, Petrolia’s market capitalization was $17 million. After the deal closed, the combined entity’s market cap rose more than tenfold and now sits at $197 million.

Sorensen said Pieridae is now looking to purchase or merge with a larger natural gas producer in Southern Alberta, which would supply the first phase of the Goldboro LNG project.

“We’re looking now at a significantly larger business than Petrolia was – significantly larger – and we’ll get a good running start to how much gas we’ll need,” Sorensen said. “We already have a plan in place that allows us to grow to the 800 million (cubic feet) of production per day that we’ll need five years from now (when Goldboro LNG is complete).”

In total, the project would export 1.3 billion cubic feet of natural gas per day from the East Coast to European countries keen to diversify their gas supply away from Russia. About half of the project’s gas supply would come from Alberta and the other half might be sourced from plays in Pennsylvania.

Talks with pipeline giant TransCanada Corp. have been going for months to ship the gas from Alberta to the East Coast, Sorensen said, and are expected to conclude soon.

Pieridae has so far announced an agreement to sell German utility Uniper SE half of the facility’s output. Sorensen said more agreements with other European utilities will be announced this year.

“There’s a lot of tug-of-war between the European Union and Russia and America right now and it’s giving us the ability to market easier in Europe just because we’re not either of those two,” Sorensen said.