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Northeastern Gas Demand Could Require More LNG Capacity

Markets in the Northeastern United States and Atlantic Canada show enough growth potential to use more than one new liquefied natural gas terminal -- and soon, say sponsors of a pipeline project to distribute offshore imports across the region.

The prediction accompanies an application to Canada's National Energy Board to build the 145-kilometer (90-mile) Emera Brunswick Pipeline for C$350 million (US$315 million) in time for deliveries of 730 MMcf/d to start Nov. 1, 2008.

The link is designed to connect the Canaport terminal under construction in Saint John, New Brunswick, to Maritimes & Northeast Pipeline (M&NP). M&NP will file capacity expansion applications in the U.S., said the Brunswick filing with the NEB.

Growth in American and Canadian Atlantic seaboard gas demand will exceed the added supplies from Canaport-Brunswick by a wide margin, the NEB was told. Incremental gas needs in the region are expected to be 1.3 Bcf/d by 2010 - leaving about 580 MMcf/d of potential demand to be satisfied by other supplies.

By 2010 the growth potential of the Atlantic seaboard gas market is forecast to reach 2.8 Bcf/d. Then, yet more growth is seen as possible, with incremental requirements reaching 4.3 Bcf/d in 2020, 5.9 Bcf/d in 2025 and 7.6 Bcf/d in 2030. About half the new demand is expected to come from Atlantic seaboard local distribution companies, with the other half driven by gas-fired power generating projects.

The projections were generated in a study that the Brunswick project commissioned from Concentric Energy Advisors Inc. The big numbers go a long way toward explaining the international interest that is driving both the Canaport and Brunswick projects.

The terminal is 75%-owned by a Canadian arm of Repsol YPF, Spain's largest oil and gas company, with New Brunswick's Irving Oil taking a 25% interest and providing the site at is Saint John refinery. Repsol has booked all the Brunswick line's capacity for 25 years. Terms of the exclusive transportation services contract are confidential so far, except for a disclosure that the deal includes a guaranteed return for the pipeline, which is owned by Atlantic Canada's Emera utilities group.

In the U.S., the arrangements call for Repsol Energy North America Corp., also known as RENA, to handle all capacity bookings on MNP and to market the gas in American destinations.

Repsol has also taken responsibility for keeping the LNG import terminal full by drawing on a global web of supplies. Sources include Trinidad and Tobago, Algeria, Nigeria, Qatar and Russia, the NEB was told.

At least initially all or most of the tanker deliveries to New Brunswick will originate in Trinidad and Tobago. Repsol owns a 30% share of the assets of BP Trinidad and Tobago, which currently produces 1.6 Bcf/d for gas liquefaction operations of Atlantic LNG Co. of Trinidad and Tobago Unlimited. Repsol also owns 23% of Atlantic LNG Co.

Repsol, reciting a list of other LNG production projects in which it is participating around the world from Nigeria to Qatar and Algeria, assures the NEB the growth outlook is strong for the global gas supply source.

"Recently the LNG market has proved to be very tight with LNG import terminal capacity having been under-utilized," the Brunswick Pipeline project acknowledged in its NEB application.

The squeeze was blamed on transient events, including rapid demand growth, long lead times for new LNG production plant construction and a fire at a major liquefaction plant in Malaysia called Tiga in 2003.

"The underlying trends suggest the LNG market will loosen considerably over the next five years," the Brunswick filing said, citing a global supply study commissioned by the Canadian project from Jensen Associates. "Capacity firmly in place by 2010 should be 53% greater than that in place at the end of 2005, not counting substantial new project capacity that has not yet been finalized."

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