Analyst: Canadian LNG Project Offers European Export ‘Layup’ But Sees Barriers

Repsol's Saint John LNG receiving terminal.

Minister of Natural Resources Jonathan Wilkinson recently stated during a press conference that Europe intends to be in a position where it can fully displace Russian gas with other sources within half a decade.

While he qualified the statement by saying demand could continue past that point, this is the targeted timeframe.

While both Pieridae Energy Limited and LNG Newfoundland and Labrador Limited have spoken publicly about the likelihood of their respective proposed projects seeing exports in the last stretch of the decade (LNG NL in 2030, for instance), president of Schachter Energy Research Services Inc., Josef Schachter, sees a pathway for Repsol to get there sooner.

“Repsol [has] an LNG import facility already in Saint John, [New Brunswick], which could be reversed,” he told the DOB, noting that Cheniere Energy Inc. had gone a similar route, transitioning its import facility into an export facility.  

“If you look at what just construction would be, you could argue that something could happen in two to three years,” he added.

“You’ve got a willing government in New Brunswick, Repsol, of course, has the capital, and you’ve got Marcellus gas not far away, you could argue the story for that one should be a layup, but it isn’t,” continued Schachter.

There are roadblocks, including the need for pipelines from TC Energy Corporation to bring Marcellus formation or western Canadian natural gas to New Brunswick.

“It has to pass through Quebec, which with Bill 21, is a real problem,” Schachter said.

Questerre Energy Corporation recently reported that the Government of Quebec intends to bring into effect Bill 21 on Aug. 23, 2022.

“Historically, the federal government doesn’t get involved in issues that Quebec favours,” said Schachter. “If Quebec doesn’t want pipelines going through to New Brunswick because their view is ‘look we have enough energy because of [Hydro-Québec] plus we are going to build more in Labrador to sell electricity to New York state — we don’t want New York state buying Marcellus gas.’

“You haven’t seen anything from TC Energy talking about them planning to expand their pipeline system because of all the politics,” he continued.

At the federal level of government, Schachter said “you need a leader here.”

Finding a way forward could open the door for others.

“If Repsol did occur, then Pieridae could tag along,” said Schachter. “Pieridae would need a partner, a big deep financial partner which means that the German utilities would have to write the cheque. But the political battles and the main obstacles would have to be removed before.

“One of them is, of course … Quebec and Bill 21 and pipelines. The second is TC Energy having Repsol, which is a big reputable partner saying to them, ‘OK, we need you to build pipelines for 200, 300, 500 million a day from where you are in Ontario … all the way, using Quebec pipeline systems …”

This would involve answering questions such as the amount of money the Government of Quebec and the Quebec natural gas utilities receive and the location from which the natural gas will be sourced, he added.

Sourcing the gas

Sable Island near Nova Scotia once offered an opportunity for natural gas, but is now said to be depleted.

“There could be onshore natural gas in Nova Scotia but it is miniscule,” said Schachter. “There could be more offshore but it would require many years of drilling and then infrastructure. The only gas that is really available right now is Marcellus gas. It is shut in and there is no pipeline because of New York state and because of Quebec.

“This is politics, this is not economics,” he added.

Advocating to expedite ‘sound projects’

Energy NL chief executive officer Charlene Johnson called LNG an “emerging energy source” in Newfoundland and Labrador.

“Along with other forms of renewable energy and our lower carbon offshore oil, Energy NL believes Newfoundland and Labrador has an abundance of natural resources that can help meet the global energy demand, and do so in a reliable, environmentally conscious, and safe manner,” she wrote in an email to the DOB.

According to Johnson, Energy NL, for some time, has outlined its desire to ensure a clear, consistent, and concise regulatory regime, and believes this should be the case for LNG projects and renewable energy projects.

“We have been encouraged by recent comments from Minister Wilkinson which recognize the importance of the energy available in Newfoundland and Labrador and the role it can play in a dynamic global energy mix,” she added.

“As an industry association, we will continue to advocate to the federal and provincial government for Newfoundland and Labrador energy and to ensure we are able to expedite sound projects which can provide reliable, environmentally conscious, and safe energy to meet global demand, while also providing benefits such as jobs and revenue to Energy NL members, the province, and the country.”

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