Sat. Aug 13th, 2022

Minister of Natural Resources Jonathan Wilkinson rises during Question Period in the House of Commons on Parliament Hill on June 23.Justin Tang / The Canadian Press

Natural Resources Minister Jonathan Wilkinson says two private-sector proposals to export liquefied natural gas from Canada’s East Coast to European countries struggling to reduce their reliance on Russian fuel will need to move forward without federal financing.

Mr. Wilkinson said in an interview that Ottawa is aiding in discussions between Canadian energy companies and prospective German buyers of LNG. But he added that the two energy proposals will have to stand on their own merits and go through Canadian regulatory reviews to ensure they meet this country’s climate goals.

“Our view is the private sector should be putting up the money for these projects, and it should be done on a commercial basis,” Mr. Wilkinson said.

“We’re certainly willing to assist in the conversations with our friends in Germany who are looking for these kinds of supplies to ensure that there are long-term arrangements, contractual arrangements that provide certainty for the private sector.”

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

Pieridae considers plan for full-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 would be able to ship the gas directly across the Atlantic Ocean to European markets.

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

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

To make their terminal dreams into reality, Calgary-based Pieridae and Madrid-based Repsol will need to arrange transportation of natural gas from Alberta through a circuitous route to the East Coast. Doing this will require them to negotiate directly with companies that operate pipelines.

“We would expect that the proponent would be working with the pipeline provider to ensure that they actually have a business case. I mean, they do not have a business case if they do not have gas, ”Mr. Wilkinson said.

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

TQM connects with the Portland Natural Gas Transmission System (PNGTS), a pipeline route in New England that is 61.7-per-cent owned by TC Energy. The remaining stake belongs to Northern New England Investment Co.

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

TC Energy said in a statement that it believes LNG from Canada could play a vital role in helping Europe wean itself off natural gas from Russia. “We respond to the needs of customers 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 its terminal in 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 to be a subsidy,” Mr. Wilkinson said. “Trans Mountain was because there was a lot of risk in the project and the proponent decided that they simply were not willing to take that kind of political risk.”

When it comes to the East Coast proposals, he said, the proponents will need to meet Canada’s net-zero targets for carbon dioxide emissions by 2050. “We are willing to try to help with the regulatory process. We are willing to help with the counterparty in Germany or elsewhere in Europe, but our view is that the private sector should put up the capital. ”

Timothy Egan, president of the Canadian Gas Association, has written four letters to Prime Minister Justin Trudeau since March in hopes of drawing more attention to Canada’s opportunities to export LNG. “While we stand ready to deliver, we require an assurance from government that the regulatory process will not delay or hamper development,” Mr. Egan wrote in his latest letter, which he sent on Thursday.

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

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

The pipeline companies would at minimum need to add compressor stations, and would likely also need to install new pipes in order to meet the additional demand the proposed terminals could create.

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

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