Movin’ Out—Exporting U.S.-Sourced LNG from the Maritimes

With Marcellus natural gas production expected to continue increasing, several companies are proposing projects to pipe a portion of the output through New England to Canada’s Maritime Provinces, where the gas would be liquefied and exported to Europe, Latin America and maybe even Asia. Some offshore Atlantic Basin gas production from Sable Island and Deep Panuke would be mixed in too. Such plans for as many as four new LNG export facilities in Nova Scotia and New Brunswick hinge on the development of new pipeline capacity through New England to the existing Maritimes & Northeast Pipeline (MNP), which would be reversed to flow north. Is this a golden opportunity or an overreach?  Today we examine prospects for exporting Marcellus gas through new Eastern Canadian LNG facilities.

It is no secret that natural gas markets in the U.S. Northeast and the Canadian Maritimes have been turned on their heads the past few years. Back in 2000, virtually all of the gas consumed in the Mid-Atlantic States and New England was piped in long distances, mostly from the Gulf Coast, and the Sable Offshore Energy Project (SOEP) was just starting to move gas from off the Nova Scotia coast down into New Brunswick and New England via the new Maritimes & Northeast Pipeline (MNP). Fast-forward 14 years and Marcellus gas has come to dominate the northeastern U.S., the flow of Gulf Coast gas into the region has slowed, SOEP output is declining, and gas from Deep Panuke--the newer offshore production area in the Maritimes—is facing competition it had not expected in New England. The MNP itself, which was built primarily to move SOEP gas down to near Boston, is likely to be flowing north before long.

The Opportunity

As we said in “Is Deep Panuke Gas a Case of ‘Right Place, Wrong Time'?” gas from offshore Nova Scotia that has been flowing into New England through the MNP is not likely to be doing so for long, given the increasing volumes of Marcellus gas moving into the six-state region. Gas from SOEP, whose production has been declining since 2008, also will have increasing trouble finding New England buyers once they have a Marcellus alternative. In the circumstances at least four companies have identified an opportunity to build LNG export facilities in the Maritimes. Their take is that such plans would guarantee a market for SOEP and Deep Panuke gas by liquefying it and shipping it overseas where prices for LNG are at a premium to the US and Canadian market (see More Than A Feeling).

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Additional gas flows through New England from the Marcellus would provide these export schemes with an abundant source of gas to supplement SOEP and Deep Panuke production volumes and ensure competitive export prices. One additional benefit for these schemes is that the Canadian government approval process for LNG exports could be  more streamlined than the complex US process that requires case-by-case approval from the Department of Energy (DOE) and the Federal Energy Regulatory Commission (see The Molecule Laws). Exporting Marcellus gas to Canada before liquefying into LNG would by-pass the US regulatory jurisdiction.

Pieridae Energy (Canada) Ltd. has been developing a project to export up to 10 million metric tons per year (MMtpa) or 1.5 Bcf/d of LNG from a proposed LNG terminal in Goldboro, Nova Scotia (see Figure #1), and things are starting to come together. In July 2013, Pieridae signed a 20-year deal under which E.ON Global Commodities SE, a subsidiary of the German energy giant, will take 5 MMmt/y, or half the Goldboro project’s capacity. In March 2014, Pieridae received “environmental assessment” approval for the project from the Nova Scotia government. The same month, Pieridae submitted an application to Canada’s National Energy Board to import up to 1 Bcf/d of Marcellus natural gas into the Maritimes through existing pipelines (MNP chief among them), and to export up to 1.4 Bcf/d as LNG from its planned Goldboro terminal to buyers overseas. The gas needs of the LNG export terminal would come from SOEP, Deep Panuke and the northeastern U.S., depending on availability and price. If all goes well, the first of two planned LNG “trains” at Goldboro could start up as soon as 2019; the second could come online six months after that.

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