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Petro-Canada Moves Step Closer to Bringing Russian LNG to Quebec

The proposed Gros-Cacouna liquefied natural gas (LNG) import terminal in Quebec got a much-needed boost last week as project sponsor Petro-Canada reached an agreement with Russia's Gazprom to proceed with initial engineering design for a $1.5 billion Baltic gas liquefaction plant near St. Petersburg, Russia.

Preliminary engineering studies will provide cost and schedule estimates on which of the two companies may proceed into detailed design engineering for the liquefaction plant, which would be located in the Baltic port of Ust Luga. LNG supply from the Baltic plant would be shipped to the Gros-Cacouna project, which Petro-Canada intends to build with its partner TransCanada Corp. The proposed $660 million regasification project would be capable of providing 500 MMcf/d (5 Bcm/year) to the Quebec and Ontario markets.

"LNG is going to be a big part of the future of the gas market in North America," said Petro-Canada CEO Ron Brenneman. "As this project moves forward, we will be in an excellent position to import long-term gas supply, not only from Russia but from other parts of the world as well. We see this agreement as an important part of our overall growth strategy."

Russia holds about 30%, or 1,680 Tcf, of the world's proved natural gas reserves. Petro-Canada hopes to join Gazprom in developing some of those reserves, in particular in the Arctic Barents Sea Shtokman gas field, one of the world's largest gas deposits. Gazprom also is talking to ExxonMobil, Chevron, Statoil and others regarding the development of the Shtokman field. However, the Baltic liquefaction project initially is expected to use gas from the existing gas grid in Russia.

Meanwhile, Anadarko Petroleum Corp. said Tuesday that it will slow down 2006 expenditures and construction on its C$600 million Bear Head LNG import terminal in Nova Scotia to bring the timetable into alignment with prospects for LNG supply. "The timing of the terminal is ahead of when supply is expected to be available," said spokesperson Lee Warren. Anadarko is "working very diligently" in talks with potential suppliers, but she noted "it's a very competitive market."

The 1 Bcf/d Bear Head terminal on Cape Breton Island, along the Strait of Canso had been slated for completion in late 2008. That date will be pushed back, and there is no new set target. Warren said Anadarko had completed the tank foundations at the site and the steel is starting to arrive, but construction of the tanks themselves will not be done now. Engineering work is proceeding, Warren said. Anadarko announced last July it had signed agreements for nominated capacity of 750 MMcf/d on a planned expansion of the Maritimes & Northeast Pipeline system. That expansion also is in its early stages.

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