In early March, an LNG event was held in Toronto on the theme of “Elevating the Eastern Canadian LNG Conversation: Major Projects, Investment & Market Analysis.” The event was supported by the Government of Alberta, and organized by Glacier Media (the parent company of the Daily Oil Bulletin), the Canadian Society of Unconventional Resources and dmg events. The event was sponsored by Bennett Jones, DGSC and Promotion Saguenay. The venue host was Trayport Limited, a wholly-owned subsidiary of TMX Group Limited. The DOB over the next two weeks will provide additional LNG-themed editorial coverage based on this event.

Small-scale LNG and compressed natural gas (CNG) can play an important role in meeting a variety of regional energy needs in Canada while reducing greenhouse gas emissions, speakers told a recent Canadian LNG conference held at the Toronto Stock Exchange.

The main market for Quebec-based Énergir, Québec’s main natural gas distribution company, is remote industrials and remote communities to which it trucks LNG, said Guillaume Brossard, director of development & LNG. “There’s a lot of these remote regions in the province of Quebec that are not served by our gas pipeline distribution system.”

The company’s liquefaction, storage and regasification (LSR) plant in Montreal was expanded in 2014 and now produces 10.5 bcf per annum of LNG — the equivalent of 27,000 tonnes of diesel. The site also has two tanks for a combined two bcf of storage and with three loading docks can load 48 trucks a day.

Énergir delivers LNG by truck within a 1,500-kilometre radius of the plant, including to some power plants in the United States where LNG is used for peaking demand.

The company recently signed a deal with Seven Generations Energy Ltd., which will supply it with 500 mmcf/d to 600 mmcf/d of “responsible” natural gas as certified by a third party. The deal was well received by the market, Brossard told the conference.

The maritime industry also offers a lot of potential for LNG and Énergir provides LNG solutions in the ports of Montreal and Quebec, the conference heard. Énergir recently completed its 100^th bunkering of LNG as a marine fuel replacing marine diesel, eliminating more than 13,000 tonnes of GHG emissions since 2017. In Quebec, there currently are eight vessels — three ferries and five boat carriers — running on LNG.

 “It’s a growing market; it’s not an easy market because infrastructure is a big challenge,” Brossard said. Unlike LNG, vessels have access to diesel at any port.

However, LNG may benefit from new International Maritime Organization (IMO) regulations mandating the use of low-sulphur fuels, which would require vessels to install scrubbers on the exhaust or use of low-sulphur diesel, which are both expensive, he said. “LNG is a very good alternative; it meets all the stringent regulations in place and it’s actually half the price of maritime diesel fuel so it’s a very good use for the small-scale energy market.”

LNG also can replace diesel to produce electricity at remote mines such as at Stornoway Diamonds’ Renard mine, he said. Commissioned in 2016, it is the first mine in northern Quebec to be powered by LNG from Énergir’s LSR plant. The mine has a 16-megawatt plant on site and usually uses about nine megawatts.

The use of LNG results in total GHG emissions 42 per cent lower than those from diesel because the mine also has a heat recovery system used to heat the mine. It also results in an annual operating cost reduction of $6 million to $8 million annually compared to diesel, said Brossard.

Énergir delivers about three trucks per day of LNG (about 21 million cubic metres a year) to the mine which is about 1,200 kilometres from the Montreal plant.

Distributed Gas Solutions Canada

However, LNG and CNG also can be delivered closer to end users, reducing costs and emissions related to the transportation of LNG, said Stéphane Boyer, CEO of Distributed Gas Solutions Canada (DGSC), and deputy director-general of Hydroméga Services Inc. of Montreal, which develops and operates clean energy projects.

Hydroméga has partnered with DGSC to bring distributed LNG production to the Canadian market. The other two partners are Quebec-based Group Desgagnés Inc., Canada’s only maritime company to use LNG for fuel, and Galileo Advanced Solutions, a United States-Argentinean partnership brought in to develop the business model of bringing LNG, using liquefaction or compression to deliver natural gas, to end users using the distributed model.

“It’s [actually] a network of distributed compression and liquefaction and micro-liquefaction stations as close as possible [to end users],” said Boyer. “They can be located at the end of the pipeline or on the wellhead.” The product is then delivered to the end user by truck, pipeline, train or ship.

Potential markets include industrials, including mines, LNG capable marine vessels, heavy duty vehicle fleets and rail locomotives as well as off-grid power generation and micro grids, he said. With electricity provided entirely by renewables in Quebec, the industrial market and freight transportation represent 30 per cent of the province’s GHG emissions, said Boyer. “To reduce emissions, you have to go to transportation; there’s no other solution.”

An advantage of the distributed solution is that no new pipelines are needed as existing infrastructure is underutilized for domestic uses, with capacity available on the TC Energy Corporation Mainline and pretty much everywhere such as in northern Quebec (Saguenay) and northern Ontario (Cochrane), he said.

“Distributed scaleable, pre-fabricated [modular] packages are easy and fast to deploy — about 18 months from the start of an environmental study to coming online,” with annual production of 300 mmcf to 10 bcf.

The micro-liquefaction approach is a reliable and proven solution that Galileo has demonstrated in Argentina, Colombia, the Marcellus and North Dakota, according to Boyer.

The availability of LNG closer to the end user also will reduce emissions from diesel-fuelled trucks used to transport it, he said. “Our industry has to be cleaner so I think we are proposing a solution that also is trying to get in that line.”

However, there also are challenges to overcome, he said, noting that DGSC has been working on its first project for the past two years. For example, it is not possible to buy new heavy duty trucks or mine haulers, even though there are some conversion kits available for some older models. It’s the same thing for locomotives.

Another problem is the end-users’ expectation about the conversion payback period, which Boyer acknowledged is “many years,” while end-users are looking for a one- to two-year payback. “It’s hard to meet their expectations in terms of pricing.”

DGSC and others in the distributed LNG market have to establish themselves as a proven and reliable solution, he said. “We are a good source of income for natural gas producers; we are a potential outcome to produce that LNG and CNG and convert end-users.”

KATE Energy

The conference also heard from Tom Elwell, chief executive officer of Kate Energy Holdings Inc., which invests in and operates power generation projects for industrial projects and remote communities in northern Canada. It relies on natural gas as a low-cost, low-CO2 replacement for diesel and other distillates and has partnered with Campus Energy Partners and Ferus Natural Gas Fuels, Inc. (Ferus NGF) to ensure security of supply and delivery.

Kate and Ferus recently announced they have signed a four-year supply contract with the Yukon Power Corporation for the supply and delivery of LNG, which will represent 20–30 per cent of power generation in Whitehorse in the winter. Ferus NGF owns and operates a plant at Elmworth and has partnered with KATE Energy to secure product from a second plant near Dawson Creek.

Elwell noted that there are 300 remote communities in Canada which use 340 million gallons of diesel fuel annually for power generation, equalling about 7.6 billion tonnes of CO2, compared to about 5.5 billion tonnes of CO2 for the same volume of LNG, a difference of about 28 per cent.

Elwell also criticized the federal government’s annual $3.6 billion subsidy of diesel for power generation in Canada.

Of mines proposed or in operation, 4,300 megawatts of power a day is to be generated or is being generated, which equates to about 2.1 billion gallons of diesel a year, he said. “That’s a tremendous opportunity for those who want to focus inward on distributed LNG in Canada for the purpose of power.”

The biggest advantage of LNG is that with all the natural gas in northwestern Canada, KATE Energy has the opportunity to save the end-user a “bare minimum” of 28–30 per cent on their existing power bills, said Elwell. The use of LNG instead of diesel could also result in cost savings of just over 60 per cent annually in carbon tax for a company producing about 8.4 megawatts a day of electricity, he said.