The writing is on the wall for liquefied natural gas (LNG) in Canada and it spells growth, according to the National Energy Board (NEB). In approving Emera Brunswick Pipeline, the NEB called it a step to use LNG to secure the northeastern United States as an “anchor market” for continued development of gas service on both the American and Canadian Atlantic seaboard.

Evidence in support of Brunswick, a C$350-million (US$330-million) pipeline for Irving Oil’s Canaport LNG import terminal showed there is potential for significant growth, the NEB noted. The project will connect the terminal, currently under construction at Irving Oil’s St. John refinery, to Maritimes & Northeast Pipeline (M&NP) at the international border, with gas scheduled to start flowing Nov. 1, 2008, following construction planned to start later this year.

By 2010, a forecast commissioned by Brunswick from Concentric Energy Advisers (CE) predicted demand in the region served by M&NP will reach 1.3 Bcf/d. By 2030 potential gas use was projected to hit 7.6 Bcf/d.

The leading growth driver is gas-fired power generation. In 2010, CE expects 58% of Atlantic region demand to be from local distribution companies and 42% from power stations. In 2030, the projections show power generation will account for half of the increased total demand.

LNG imports will have to grow for the Atlantic gas market to reach its potential, the data suggests. CE predicted LNG’s share of the overall U.S. market will increase more than five-fold to 16% from its current piece in the range of 3%.

As foreshadowed by reserves estimate reductions over the past three years, production by Nova Scotia’s Sable Offshore Energy Project (SOEP) is tapering and in no condition to fulfill Atlantic seaboard demand growth potential. The cuts lopped about 50% off SOEP’s initial reserves estimates of 3 Tcf, after the geological reservoir turned out to be more complicated than expected and prone to subterranean water flows that cut off gas production.

Evidence in the Brunswick case showed deliveries on M&NP, completed in 1999 to link SOEP to the northeastern U.S., have dwindled to the range of 400 MMcf/d, or about 20% below the line’s capacity for 530 MMcf/d.

Neither M&NP nor SOEP’s owners opposed the Brunswick project. In addition to serving the U.S. growth market, the new line could be used to satisfy current and potential Canadian demand by “swap” and “backhaul” arrangements for LNG imports, the NEB said.

In effect, LNG would become a Canadian as well as an American supply mainstay on the Atlantic seaboard as SOEP output either remains flat or continues to dwindle. No participant in the lengthy Brunswick case suggested the Canadian supply outlook will retrieve its 1990s optimism about large-scale growth in offshore production. The sole new project on the horizon remains the deferred development of the Deep Panuke discovery, which EnCana Corp. may be reviving soon (see related story). Production estimates from that project, however, have been revised downward from a potential 400 to 300 MMcf/d.

The NEB characterized LNG imports and Brunswick as positive developments for the security of gas supply for the Atlantic seaboard because they create diversity of sources on an international scale.

Spain’s national energy company, Repsol — which ranks in the top 10 of world oil and gas producers — has contracted for 75% of Brunswick’s initial capacity of 1 Bcf/d. The other 25% is booked by Irving. All of the imports into Canaport are expected to come from the Spanish company’s array of supply sources in the Trinidad region of the Caribbean and the Middle East.

The NEB was not troubled when Repsol did not specifically identify sources of the LNG and only said the supplies will be drawn from its array of fields depending on market developments. “Brunswick Pipeline’s reliance on Repsol’s portfolio of gas sources creates a considerable benefit in that it provides flexibility to draw supply from various fields. This flexibility mitigates potential supply problems in any specific basin,” the NEB said.

The board urged Atlantic Canadian gas users such as Enbridge Gas New Brunswick, a regional distributor, to make supply arrangements such as swaps, backhauls and new direct delivery connections with Irving and Brunswick.

“The project will likely encourage increased utilization of current regional infrastructure, such as the M&NP system, through the potential accessibility to an incremental and reliable source of supply,” the NEB predicted.

M&NP is wasting no time at trying to make the NEB prediction come true. The pipeline is holding an open season for new service requests through Aug. 31, inviting potential shippers on both sides of the international border to step forward.

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