Ottawa seeks private sector solution for East Coast LNG exports to Europe

Natural Resources Secretary Jonathan Wilkinson rises during question period in the House of Commons on Parliament Hill on June 23.Justin Tang/The Canadian Press

Natural Resources Secretary Jonathan Wilkinson says two private sector proposals to export liquefied natural gas from Canada’s east coast to European countries struggling to reduce their dependence on Russian fuel must go ahead without federal funding.

Mr. Wilkinson said in an interview that Ottawa helps with discussions between Canadian energy companies and: potential German buyers of LNG. But he added that the two energy proposals will have to stand on their own merits and undergo Canada’s regulatory assessments to ensure they meet this country’s climate goals.

“We believe that the private sector should pay the money for these projects, and it should be on a commercial basis,” said Mr Wilkinson.

“We are certainly willing to assist in the talks with our friends in Germany who are looking for this kind of necessities to ensure that there are long-term, contractual arrangements that provide security for the private sector.”

After Moscow’s large-scale invasion of Ukraine in February, Europe began scrambling to cut natural gas imports from Russia. Last week, German Vice Chancellor Robert Habeck told a crowd at an event hosted by the Sueddeutsche Zeitung newspaper that Russia could begin a blockade of the Nord Stream 1 gas pipeline on July 11. Germany has begun to brace for gas rationing this winter.

Pieridae considers plan for large-scale Nova Scotia LNG project to export gas to Germany

The two east coast proposals are being made by Pieridae Energy Ltd.’s Goldboro LNG in Nova Scotia, and Repsol SA’s Saint John LNG in New Brunswick. Both companies say they are studying the feasibility of building new LNG export terminals, which can transport the gas directly across the Atlantic to European markets.

Last year, the federal government rejected Pieridae’s request for $925 million in funding for Goldboro LNG.

Canada currently has no operational LNG export terminals. And only one terminal is under construction: the Shell PLC-led LNG Canada project, which will ship natural gas in liquid form to Asia from Kitimat, BC. That export should start in 2025.

To fulfill their ultimate dreams, Calgary-based Pieridae and Madrid-based Repsol will need to arrange the transportation of natural gas from Alberta via a circuitous route to the east coast. For this, they have to negotiate directly with companies that operate pipelines.

“We would expect the proponent to work with the pipeline provider to ensure they actually have a business case. I mean, they don’t have a business case if they don’t have gas,” Mr. Wilkinson said.

The TC Energy Corp. pipeline system. in Ontario would require significant upgrades and expansions, as would the TransQuebec & Maritimes Pipeline system in Quebec. Calgary-based TC Energy and Montreal-based Énergir each own a 50 percent stake in TQM.

TQM is connected to the Portland Natural Gas Transmission System (PNGTS), a pipeline route in New England that is 61.7 percent owned by TC Energy. The remaining interest belongs to Northern New England Investment Co.

The PNGTS, in turn, connects to the Maritimes and Northeast Pipeline, which runs from New England to New Brunswick and Nova Scotia. Calgary-based Enbridge Inc. owns 77.5 percent of Maritimes and Northeast, with the remainder owned by Emera Inc. and Exxon Mobil Corp.

TC Energy said in a statement it believes LNG from Canada could play a vital role in helping Europe forgo natural gas from Russia. “We are responsive to customer needs and welcome opportunities to collaborate and develop solutions to meet those needs,” the company said. “Energy projects need the support of indigenous groups, governments, regulators, communities and buyers to ensure projects are successfully realized.”

Mr Wilkinson said the situation with LNG proposals on the East Coast today is much different than the case of the Trans Mountain oil pipeline four years ago.

Kinder Morgan Canada Inc. sold the Trans Mountain project, including the terminal at the Port of Vancouver and plans to expand the pipeline, to Ottawa for $4.5 billion in 2018, after years of failed or stalled energy proposals in Canada.

“Trans Mountain was not intended as a subsidy,” said Mr. Wilkinson. “Trans Mountain was because there was a lot of risk in the project and the proponent decided they just weren’t willing to take that kind of political risk.”

When it comes to the East Coast proposals, he said, proponents will have to meet Canada’s net-zero carbon dioxide emissions targets by 2050. “We are willing to try and help with the regulatory process. We are ready to help with the counterpart in Germany or elsewhere in Europe, but we believe that the private sector should raise the capital.”

Timothy Egan, president of the Canadian Gas Association, has written four letters to Prime Minister Justin Trudeau since March, hoping to draw more attention to Canada’s opportunities to export LNG. “While we are ready to deliver, we need assurances from the government that the regulatory process will not slow down or hinder development,” Mr Egan wrote in his latest letter, which he sent on Thursday.

Meanwhile, the Sierra Club Canada Foundation and the Council of Canadians are urging the federal government to reject new LNG projects in Canada. “Instead of pushing for gas expansion, Canada should use more renewable energy to protect consumers’ wallets, future-proof our economy and protect our climate,” said Gretchen Fitzgerald, the Sierra Club’s national program director. in a statement.

Mr. Wilkinson said Pieridae and Repsol still have a lot of work to do as they explore how best to build their respective export terminals and convince TC Energy and other companies to make the necessary upgrades to pipeline systems.

The pipeline companies would at the very least add compressor stations and probably also install new pipelines to meet the additional demand that the proposed terminals could create.

“We’re definitely interested in a final investment decision from one of them and we’re trying to help them reduce uncertainty about, for example, some of the upgrades that would be needed,” said Mr. Wilkinson.

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