There is a growing number of contenders trying to disprove conventional wisdom that growth of global traffic in liquefied natural gas (LNG) will largely pass by Canada. Project Rabaska in Quebec is the latest entry (see Daily GPI, Aug. 10) and follows Irving Oil’s proposal to add LNG to its oil port at the New Brunswick capital of St. John and Access Northeast Energy’s (now Anadarko, see related story) Bear Head project for northern Nova Scotia.

Widespread skepticism that Canada can develop LNG capacity any time soon surfaced in an industry canvass by the National Energy Board. In a report on consensus expectations for the Canadian gas industry earlier this month, the NEB recited doubts that there can be any LNG development in Canada prior to 2010 and a conviction that it is unlikely all the current projects can proceed.

But Rabaska adds an international flavor and a strong element of practical experience to the project lineup. The consortium includes Gaz de France as well as two Canadian partners, Quebec distributor Gaz Metro and national pipeline mainstay Enbridge Inc. The French transporter and distributor has participated in the birth and evolution of the global LNG trade for more than 40 years. Current assets in the field include two terminals in France and six tankers. A third terminal is being developed in France and three more LNG ships are on order.

The Rabaska plan includes an LNG terminal on the St. Lawrence River near Quebec City and a 30-mile pipeline to the Trans Quebec and Maritimes system that serves as the eastern leg of the international TransCanada network. For C$700 million (US$525 million), the Rabaska group proposes an initial installation of 500 MMcf/d of gas import capacity. Rabaska set a target of 2008 for completing construction and going into service.

Within the last several days, Anadarko has bought the Bear Head terminal, Irving has received federal and provincial environmental approvals, and the regulatory process has started on Rabaska with the NEB issuing a “scoping” document to kick off formal environmental and socio-economic reviews. If all of the projects can stay on the rails, Canada will be the destination for 2.5 Bcf/d of LNG in four years, and the figure could increase by 20% soon afterwards.

Targets of 2007 have been set for the beginning of operations by the C$750-million (US$560-million) Irving project and the C$420-million (US$315-million) Anadarko-Access Northeast development. The New Brunswick and Nova Scotia projects each propose initial capacity of 1 Bcf/d. The Access Northeast design calls for construction of facilities capable of being rapidly expanded to 1.5 Bcf/d.

All three Canadian projects also claim to be exceptions to the rule — chiefly in the U.S.– that environmental resistance can be expected to delay or outright stop LNG terminal projects. Along with Irving Oil in New Brunswick, the Bear Head project in Nova Scotia has environmental approvals. The Irving project only adds some facilities to a major oil port that has operated for more than 30 years.

Along with approval by a federal-provincial environmental assessment, Anadarko inherited from Access Northeast a highly supportive relationship with the Nova Scotia government, which is the project’s landlord in the Point Tupper Industrial Park about 120 miles northeast of Halifax. The provincial government went on the record as an enthusiastic supporter when the LNG project negotiated its 160-acre lease.

The Rabaska group points out its project represents only a modest addition to port facilities and ship traffic along one of the world’s busiest sea routes. The Quebec City area is already home to a variety of heavy marine operations including one of the continent’s biggest shipyards. Rabaska predicts it would generate only a 1% increase in ship traffic in the St. Lawrence, where the volume averages 5,000 to 7,000 vessels per year. The shipping already includes oil tankers, chiefly delivering crude from the North Sea for central Canadian and eastern and midwestern U.S. markets.

The economic reasoning behind all three Canadian LNG projects echoes the industry outlook documented by the NEB. The virtually unanimous verdict is that conventional gas production in western Canada is peaking and will either soon enter decline or already has. Expansion of the Sable Offshore Energy Project or development of new platforms nearby in Nova Scotia waters have largely dropped off the industry table, due to drilling disappointments and a deferral of the Deep Panuke project by EnCana Corp. No date has been set yet for reviving Deep Panuke even though step-out wells attempting to raise the site’s reserves have generated some encouragement, EnCana executives told a recent financial results teleconference.

More optimistic opinion about Canadian supplies relies on hopes for a revival of expensive exploration out into the nation’s gas “near frontier” in northern British Columbia. Otherwise, heavy reliance is being put on the proposed Mackenzie Gas Project and coalbed methane. Although the Mackenzie consortium still hopes to file for construction this summer, few in the industry believe “cultural issues” led by unresolved aboriginal land claims will permit northern gas to reach markets before 2010 if then.

With coalbed methane still in its infancy in Canada, projections of its performance remain modest. The NEB expects CBM output to reach 100 MMcf/d this year and gradually increase. The NEB acknowledges that some specialists say it may be too pessimistic with a forecast that CBM will take until 2010 to reach output of 1 Bcf/d. The board also observes there still only has been “mixed success” due to differences between Canadian and U.S. coal deposits that continue to make tapping them north of the border a technological challenge. The geological and technical issues continue to spell “significant uncertainty surrounding the future of CBM development,” the NEB said.

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