As demand continues to be strong but conventional production stays flat and northern supplies remain uncertain, Canadian authorities are betting that liquefied natural gas import terminals proposed for re-exports to the United States will make it into construction.

The expectations show in a status report on eight projects by the gas branch of Natural Resources Canada. The agency acknowledges skepticism caused by high costs and environmental opposition but suggests that markets will drive project sponsors into overcoming the obstacles.”Before the end of this decade, it appears likely that the North American gas supply picture will include at least one or two Canadian LNG import facilities,” the survey predicts.

Needs, opportunities and difficulties involved in building Canadian liquid-gas tanker terminals also figure prominently in a working paper by a committee called the NAEWG Natural Gas Trade and Interconnections Group. NAEWG stands for North American Energy Working Group, a four-year-old agency run co-operatively by Natural Resources Canada, the U.S. Department of Energy and the Mexican Secretariat of Energy.

The international group predicts “the largest single source of additional gas supplies for North America will come from LNG imports.”The consensus among the government experts is that “all three countries expect to import considerable LNG volumes in the future. Overall, North American imports of LNG could reach 7.9 Bcf/d by 2012.

“Just where this four-fold increase from the 2004 LNG import average of 1.8 Bcf daily will take place is left wide open. The international committee also underlines the doubts hanging over the lineup of LNG proposals.”Whether planned LNG expansions will occur is anything but certain as there are significant regulatory and public perception hurdles to be overcome,”the NAEWG report says.

The international group, pointing to the current lineup of 55 projects in the three North American countries, suggests that LNG terminal construction will be case of survival of the fittest.”At this point more LNG facilities have been proposed in North America than need to be built under the rosiest demand scenarios,” the NAEWG report says.”It is expected that competitions between proponents for limited LNG supply and financing will result in most proposals being shelved.

“The eight Canadian LNG terminal proposals, with combined capacity exceeding 4 Bcf/d, include:

While the main driver of the Canadian LNG projects remains plans for re-export to the U.S., the NAEWG gas group points out that the market shows signs of heightening the motivation by adding domestic requirements for new supply sources.”As production levels from conventional sources in western Canada mature,unconventional supplies such as coalbed methane, frontier gas and LNG will be encouraged,” the international consensus report says. “The National Energy Board projects that these three sources of natural gas supply will account for over 50% of Canadian supply by 2025, in comparison to less than 1% in 2003.”

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