U.S. LNG imports take bite out of Canada's natural gas sales

Shawn McCarthy
Global Energy Reporter
Globe and Mail

Canadian natural gas producers are suddenly finding themselves in competition for lucrative U.S. markets with counterparts in places like Nigeria and Egypt, as imports of liquefied natural gas displaced Canadian exports earlier this year.

In the first eight months of the year, LNG imports rose 56 per cent by dollar value, by $1.8-billion to $5-billion (U.S.). In that same period, Canadian exports declined 9.6 per cent, or $1.8-billion to $17.4-billion, according to figures from the U.S. International Trade Commission.

Greg Stringham, vice-president with the Canadian Association of Petroleum Producers, said the surge in LNG imports was a temporary phenomenon, resulting from price disparity between North American markets and European ones that encouraged producers to ship to the U.S.

But he said the increase in natural gas imports from overseas contributed to a glut of natural gas in storage in the United States, which led to lower prices and fewer exports for traditional Canadian suppliers.

"This is the first inkling we've seen of international competition in natural gas coming in and filling up storage and backing Canadian gas into storage here, and causing the depressed prices to be in place," he said.

Until recently, natural gas was strictly a regional commodity - there was virtually no competition for North American producers except within the continental market itself. But growing volumes of LNG are transforming the clean-burning energy source into a global commodity, though the tanker volumes are relatively modest over all.

The three largest suppliers to the U.S. are Trinidad and Tobago, Egypt and Nigeria, with the gas-rich Caribbean island providing more than the two largest African suppliers combined, the U.S. International Trade Commission figures show.

The U.S. has seen the expansion of three of five existing terminals that take liquefied natural gas off tankers and re-gasify it to be shipped to markets by pipeline. And construction is under way for four other terminals, with more planned, including several in Canada.

Robert Ineson, an analyst with Cambridge Energy Research Associates, said the decline in exports had more to do with falling production north of the border than the availability of LNG imports.

"Production will continue to fall because of the slowdown in drilling activity" that has been seen in Western Canada in the past two years, he said. "We also expect more gas produced in the region to stay home to be consumed in some of the oil sands projects."

Mr. Ineson said North American consumers will increasingly have to turn to LNG suppliers to compensate for falling production. "In North America as a whole, there's a growing need for additional supply beyond what we can produce in the U.S. and Canada," he said.

Ed Kelly, vice-president for gas and power for Scottish-based consulting firm Wood Mackenzie, said it is still early days for the development of LNG in North America. But he said volumes could double to 4.7 billion cubic feet a day over the next two years, and then double again by 2015.

Port defends 'remote' risk of liquefied gas blast

Robin Turner
Western Mail

MILFORD HAVEN, ENGLAND- Port Authority yesterday released risk assessment reports on its controversial proposed liquefied natural gas (LNG) importing complex.

The port authority, which had tried to keep the reports out of the public domain, claimed they showed LNG poses one of the lowest threats to the public and property compared to other chemicals.

One report, by a senior risk analyst at Lloyd's Register of Shipping, described the potentially disastrous consequences of a collision between an LNG ship and a ferry. The report said there would be "multiple fatalities" if such a collision occurred and leaking LNG was ignited.

The Port Authority said, "The report concludes those consequences might occur only in very particular and limited circumstances and conditions, which are extremely unlikely ever to happen. The report ends by saying it can be concluded LNG has specific parameters which make the likelihood of a major explosion remote."

In March, the Information Commissioner ruled some information was "environmental" and the documents should be made public. The Port Authority appealed.

The authority said, "On detailed consideration it has now decided to withdraw the appeal and to release the documents as directed by the Information Commissioner."

Chief executive Ted Sangster added, "We agreed to release these risk assessments now to save further legal proceedings. However, this does not mean our original decision not to release them is wrong. In total, they enable us to say with confidence LNG shipping can be handled safely and efficiently in the port."

Gordon Main, spokesman for campaign group Safe Haven said, "There is no evidence from these documents how, or if the actual hazards themselves have been quantitatively analysed in risk terms to the wider public."

Ottawa unmoved by positive LNG study

Shawn McCarthy
Globe and Mail
October 6, 2007

A federal study has concluded that LNG tankers could navigate Head Harbour Passage off the Bay of Fundy with little risk of accident, but Ottawa continued to insist yesterday that it will bar U.S. tankers from the disputed waters.

Proponents of the competing LNG plants proposed for northern Maine have seized on the study - which was released on an obscure federal website - to argue that the Canadian government has exaggerated the safety concerns in order to favour domestic producers.

The federal government has refused to co-operate with U.S. regulators who are reviewing three separate plans for terminals that will regasify imported liquefied natural gas and pipe it to markets in the U.S. Northeast.

Earlier this year, Canada's Ambassador in Washington, Michael Wilson, wrote to U.S. Secretary of State Condoleezza Rice that the projects "present risks to the region of southwest New Brunswick and its inhabitants that the government of Canada cannot accept."

However, the report by Toronto-based Senes Consultants Ltd. said there have been no serious accidents involving LNG tankers in the nearly 50 years they have been in use.

"While large accidents involving the shipping and handling of LNG are possible, the probability of occurrence is small, especially with Canadian and U.S. regulation in place and enforced," it said.

It added the risk of incidents involving the uncontrolled release of liquefied natural gas is "very small."

Still, the Senes report noted the tricky waters of Head Harbour Passage require extremely careful navigation and that the surrounding eco-system could be severely affected by the discharge of fuel or LNG from tankers.

Dean Girdis, president of Downeast LNG Inc., said the report will be helpful as the U.S. Coast Guard and Federal Energy Regulatory Commission prepare their environmental impact statement, a process that should be completed by early 2008.

"I don't see how the study supports the conclusion that it is unsafe for ships to navigate Head Harbour Passage," Mr. Girdis said in an interview yesterday. "There is nothing in the study that concludes our project should not proceed."

Mr. Girdis said he believes - with backing for some Canadian academics and the U.S. state department - that tankers heading for a northern Maine terminal would have the right to traverse Canadian waters.

"They may maintain their position on no transit but there is no law or regulation which restricts LNG traffic going through Head Harbour Passage," he said. "And according to our lawyers, it's clear that it is Canadian waters, but that you have right of passage through it."

But Veteran Affairs Minister Greg Thompson, the government's senior New Brunswick minister - said the proponents face other hurdles - including opposition to their pipeline routing and lack of sources of LNG. But should they proceed, Canada will oppose all LNG tanker traffic through head Harbour Passage, he said.

"This particular location is not a smart location, it's not a safe location," Mr. Thompson said. "And we consider those internal Canadian waters so we have a responsibility to protect our citizens, protect the environment and protect the economy."