Death of Energy East pipeline could spell curtains for east coast export project Bear Head LNG
From the Halifax Chronicle Herald
The death of the Energy East pipeline further jeopardizes a planned multibillion-dollar liquefied natural gas export facility on the Strait of Canso.
“I wouldn’t call it a snowball’s chance in hell,” said Dirk Lever, head of research at Calgary’s AltaCorp Capital Inc., of the likelihood of Bear Head LNG’s proposed export facility being built. “But it’s close to it.”
Bear Head LNG proposes to get gas to its plant via a 1,600-kilometre pipeline from North Bay, Ont. to St. John, N.B. adjacent to TransCanada Corp’s proposed Energy East pipeline. On Oct. 5 TransCanada announced it was terminating Energy East.
Bear Head strategic and regulatory affairs adviser Paul McLean said Wednesday that the termination of Energy East doesn’t change their plans and won’t make a natural gas pipeline more expensive.
But McLean’s company isn’t proposing to pay for the pipeline.
They’re proposing that TransCanada will team up with a producer of natural gas in Western Canada to pay for the pipeline they need to supply their proposed facility.
“A Western-basin producer will sign on with TransCanada,” said McLean.
“. . . Everything is really contingent on securing a path of natural gas to the facility.”
None have signed on thus far and TransCanada did not return a call for comment on whether they are planning to build a pipeline to get gas to a plant that doesn’t have financing secured or agreements with overseas purchasers of the gas it proposes to liquefy.
Bear Head hasn’t given an estimate of the pipeline’s cost. However, Enbridge is predicting its 1,660-km Line 3 oil pipeline from Hardistry, Alta., to Superior, Wis., will cost $8.9 billion Canadian.
Then there would be the estimated $5-billion cost of building Bear Head’s LNG export facility.
“This is a company that really doesn’t have a lot of capital behind it,” said Lever.
“They have a project and they want someone else to fund it.”
Bear Head LNG is owned by Australia-based Liquefied Natural Gas Ltd. That company is also proposing an export terminal for Lake Charles, Louisiana, under the name Magnolia LNG.
The company’s stock was trading at 42 cents a share on the Australian Stock Exchange on Tuesday, down from 57 cents a year ago.
Liquefied Natural Gas Ltd. lost just over $29 million Canadian in the year leading up to its audited June financial statement. That was down from a $112-million loss the year before. The company has $57 million in assets.
“It is not lost on me that the dominant question on everyone’s mind is timing — when can we expect offtake sales and when do we expect to take (final investment decision) on our projects?” wrote the company’s chief executive officer Gregory Vesey in his June report to shareholders.
“On these points, I cannot provide absolute certainty . . .”
The June shareholders report warns that the company only has sufficient cash reserves to continue until mid-2018. If the current trend of being unable to sell offtake agreements on natural gas for its two proposed projects holds, the report says the company will have to either sell shares, sell one of its projects or find a way to make money off the natural gas liquefaction technology it holds the rights to.
Liquefied Natural Gas Ltd. bought the Bear Head project for $11 million from Anadarko Petroleum Corp. in 2014. Anadarko had spent $100 million on a proposed natural gas import facility on the site — pouring foundations for two large LNG tanks and getting regulatory approvals.
Anadarko mothballed the project in 2007.
According to the province’s online property database, Bear Head owns 278 acres in the Point Tupper Industrial Park with an assessed value of $10.3 million.
The majority of it was obtained by Liquefied Natural Gas when it bought the project from Anadarko. However Nova Scotia Business Inc. sold 72.42 acres to the company last year for $450,000
“There were milestones we jointly identified that if we didn’t meet there would be financial penalties (related to the land),” said McLean.
“To my knowledge we have achieved all the milestones we jointly agreed to.”
For its part, NSBI spokeswoman Marly Somers said the nature of those conditions are confidential.
From Bear Head LNG
Bear Head LNG Corporation, a wholly owned subsidiary of LNGL, is developing an 8 mtpa or greater LNG export terminal in Nova Scotia. The 327-acre site is located on the naturally deep waters of the Strait of Canso in Point Tupper, Richmond County, Nova Scotia. The prior owners of Bear Head LNG spent more than $100 million to design, complete engineering work, and develop the Bear Head LNG site in the early 2000s – all part of the assets Bear Head LNG is leveraging.
Bear Head LNG requires Canadian federal, provincial, and local regulatory approvals to construct a liquefied natural gas export facility. All of 10 initial Canadian permits are in place, including an approved environmental assessment; permits to construct a gas plant facility from both the Department of Natural Resources and the Nova Scotia Utility and Review Board; and a development permit from the municipal government in Richmond County.
Canada’s National Energy Board (NEB) has granted Bear Head LNG authorization to import natural gas from the U.S. and to export up to 8 mtpa of LNG from Canada, with authority to expand to up to 12 mtpa in the future.
The U.S. Department of Energy (DOE) has granted Bear Head LNG authority to export LNG derived from U.S. produced natural gas to countries with which the U.S. has free trade agreements (FTA) and to all countries with which trade is not prohibited by U.S. law or policy (Non-FTA).
Feed gas supply is expected to come from a combination of Canadian and U.S. producers. Bear Head LNG provides a viable, economically competitive option for Western Canadian Basin gas producers to monetize their production in the international LNG market, essentially a Plan B for Western Canadian resource owners that have found west coast Canadian LNG projects too costly.
Bear Head LNG has retained KBR Inc. (KBR) to develop Front End Engineering & Design (FEED) for the Bear Head terminal. Bear Head is looking to gain design and development efficiencies by using KBR to perform FEED. KBR is a global leader in LNG engineering and is a party to a the signed Engineering, Procurement and Construction (EPC) contract with Magnolia LNG LLC, a sister company of Bear Head LNG Corporation, which is developing the Magnolia LNG export terminal in Lake Charles, Louisiana.
The Bear Head LNG export terminal location is about half the shipping distance to major European markets compared to U.S. Gulf ports, and is closer than its North American competitors, including those in British Columbia, to other major LNG markets including burgeoning natural gas markets in India and Argentina.
