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Researcher Mulls LNG Export from Canada's East Coast

When it comes to Canadian liquefied natural gas (LNG) export terminals, what's good for the West could also be good for the East, according to a researcher at the Canadian Energy Research Institute (CERI).

In the August "CERI Commodity Report -- Natural Gas," Editor Mellisa Mei notes the Kitimat LNG liquefaction/export facility planned for the country's West Coast (see NGI, Aug. 17) and suggests that the Port of Sept-Iles northeast of Quebec City would make an ideal East Coast location for LNG liquefaction and export. This site would be near regional and pipeline gas supplies and within reasonable shipping distance of European markets, she wrote. Such a facility -- while not currently proposed -- would offer Canada a hedge against a downturn in domestic gas markets, she noted.

An LNG facility at Port of Sept-Iles could access gas from Quebec's Utica Shale, Western Canada's conventional and unconventional supplies and possibly surplus gas from the United States. TransCanada could carry gas from the Western Canadian Sedimentary Basin with additional compression and a pipeline extension, Mei wrote. "Bi-directional pipelines that ship natural gas across the Ontario-U.S. border would allow domestic U.S. gas to enter TransCanada's Mainline system, and eventually arrive at the Port of Sept-Iles" as well.

Mei noted that two LNG regasification projects are still on the table for the East Coast. Rabaska LNG (see NGI, May 19, 2008) has been approved and Energie Grand-Anse has been proposed. The Gros Cacouna project was suspended last year.

"Given the impact that the shale gas boom has had on the North American natural gas market, it is uncertain whether or not these projects will be shelved," Mei said. "Since locating a natural gas liquefaction facility upstream from a natural gas regasification plant would not make much sense, moving forward with a liquefaction project at the Port of Sept-Iles would lead to the conclusion that Rabaska LNG and Energie Grand-Anse are not constructed."

Mei cautioned that it would take six years from permitting to construction completion to get an LNG liquefaction facility on the ground on the East Coast if work were started today. "The natural gas market today is not what it was six years ago, and in 2015 the market will likely not resemble what it is today," Mei wrote. "A plethora of downside risks would exist for the substantial capital investment required to construct this hypothetical liquefaction facility."

For one, Canadian LNG supplies could be undercut in the European market by low-cost LNG from Middle East gas breadbasket Qatar, which by the end of 2010 is projected to have about 77 million metric tons of liquefaction capacity.

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