The Quoddy Tides

Eastport, Maine

2009 June 26

Canaport LNG set to receive first shipment

by Edward French

Residents around Passamaquoddy Bay have been wrangling over liquefied natural gas (LNG) projects for five years, while some 50 miles away a new LNG terminal in Saint John was expected to receive its first shipment this week from the 932-foot Bilbao Knutsen. The terminal is the first of its kind to be built on the east coast of North America in 30 years and the first ever to be built in Canada.

The cool-down shipment arriving this week will be used to test the facility to ensure that it is working as designed. The Canaport LNG terminal is expected to receive its first commercial shipment in July, and then ships are expected to come about once a month, although the frequency will depend on market needs, according to Mary Usovicz, director of external affairs for Repsol Energy North America, one of the partners in the project.

The exclusion zone around the LNG tankers will be a half nautical mile when the ship is in transit or at anchor. The berthing exclusion zone is 620 metres, says Carolyn Van der Veen of Canaport LNG. The Canaport facility will be creating 70 permanent jobs for its operations.

Opposition to the Canaport facility has been muted, compared to the controversy surrounding the three LNG terminal proposals for Passamaquoddy Bay. Concerns have been raised about the pipeline route, the risk to right whales of ship strikes caused by the increase in ship traffic, and compensation to lobster fishermen who are losing lobster ground, according to David Coon of the Conservation Council of New Brunswick. A greater controversy was caused by a tax deal that allows the LNG terminal owners to pay property taxes of $500,000 a year for 25 years, with no adjustment for inflation.

Concerning the difference in the response generated by the Saint John and the Passamaquoddy Bay LNG proposals, Coon says, "Siting is everything," noting that Saint John is an industrialized city with a clear shot at the shipping lane. Passamaquoddy Bay is a relatively nonindustrial area that has an economy based on natural resources. Ships also face the navigational challenges of Head Harbour Passage, he says.

Irving Oil applied for permits to add LNG to its deepwater oil terminal, Irving Canaport, in July 2001, submitted an Environmental Impact Statement in March 2004 and partnered with Repsol YPF in September 2004 to construct and operate the LNG terminal, with Repsol having 75% ownership of the facility and Irving 25%. Repsol is Spain's largest oil company and one of the 10 largest private oil companies in the world. The company's been in the LNG business for about 30 years.

The one billion cubic feet per day Canaport facility, which is enough gas to heat 5 million homes, will provide natural gas to homes, businesses and industry in the Maritimes and the northeastern U.S. Repsol could supply as much as 20% of the natural gas demand in New England and New York from the Canaport LNG terminal and other gas holdings. Usovicz of Repsol says LNG imports through the terminal will meet current market needs in Canada and the northeastern U.S.

The regasified LNG from the Canaport terminal will flow through the Brunswick Pipeline, a 90-mile pipeline connecting the terminal to the existing Maritimes & Northeast Pipeline at the U.S./Canada border at the St. Croix River at Baileyville. In the U.S., Repsol has contracted capacity on the Maritimes & Northeast Pipeline to provide gas into Algonquin Gas Transmission at Beverly, Mass., and into the Tennessee Gas Pipeline at Dracut, Mass.

An overcapacity for LNG imports?

With discoveries of large-scale domestic gas supplies, the number of ships bringing imported LNG to the Canaport facility may not be as many as first predicted, according to Barbara Shook, the Houston bureau chief for Energy Intelligence Group, a research organization that covers the oil and gas industry. However, she notes that if more markets are developed in the Maritimes through the conversion of coal-fired and oil-fired power plants to natural gas, there will be a need for more LNG imports at Canaport.

Shook believes that there is not any need for more LNG terminals in North America, since there is "plenty of capacity" for LNG imports, and more terminals are under construction. She notes that one terminal in Freeport, Texas, is shut down because it cannot get any suppliers, and another in the Gulf of Mexico hasn't had any cargo for two years. Two offshore buoys for LNG imports off Boston "are not utilized at all," she says.

With gas supplied by the Maritimes & Northeast Pipeline, shale gas and coal-bed methane gas discoveries, along with the new Canaport facility, Shook says, "I don't see the need for another terminal." She doesn't understand why the Passamaquoddy Bay proposals are still being pursued.

Shook's comments are supported by several reports. The Potential Gas Committee, a natural gas think tank, recently issued a report estimating that gas resources in the U.S. have surged by 35%, mostly because new technologies have allowed for access to new domestic supplies. The Energy Information Administration, which provides energy statistics from the U.S. government, also points to domestic gas production as providing "a competitive alternative to imports of LNG," according to a March 2009 report. The report states, "In the longer term, high LNG prices (which are tied to oil prices in many markets) and ample domestic natural gas supplies reduce U.S. demand for LNG imports."

However, Rob Wyatt of Downeast LNG, which is proposing a terminal in Robbinston, says there is a tendency for people to look only at short-term trends and fail to recognize fluctuations in the market. Wyatt, who has been involved with energy projects for 35 years, says he's seen most people's projections on the need for projects be proven wrong. "We see a long-term need for natural gas imports, which are a prerequisite for the natural gas supply in the northeast." He predicts that there will be an increasing demand for natural gas in the U.S. and that intermediate-sized projects, like the one Downeast LNG is proposing, will be needed.

Other questions about the viability of new terminals are centered around the suppliers of natural gas. Shook says most of the surplus supply of LNG will be coming from Qatar, which is set to become the world's leading LNG producer, and the Qataris use their own tankers and are building their own import terminal at Port Arthur, Texas.

Canaport partner Repsol holds significant acreage in the Gulf of Mexico from which it currently produces natural gas. The Saint John terminal will be importing from Trinidad and Tobago, where Repsol has an equity position and LNG off-take agreements. After 2010, supplies are also expected to come from Peru, where Repsol has off-take rights from a new development. Repsol has also signed to take all of the output, up to 300 million cubic feet per day, from EnCana's Deep Panuke offshore gas project off the coast of Nova Scotia.

None of the three Passamaquoddy Bay proposals is presently committed to a supplier, but Wyatt notes that suppliers are "a mobile target."

Maritimes & Northeast Pipeline recently added compressors on the U.S. side to double the pipeline's capacity in order to handle the natural gas from the Canaport terminal. Although Shook says that there is a limited capacity in the pipeline, Wyatt believes Downeast LNG probably could use the existing capacity of the pipeline without any additional expansion of the system. He notes that Downeast LNG is projecting a base load of 500 million cubic feet per day, while Quoddy Bay LNG projected 2 billion, Calais LNG 1 billion and Canaport 1 billion.


© 2009 The Quoddy Tides
Eastport, Maine
Article republished on Save Passamaquoddy Bay website with permission.