Nova Scotia liquid natural gas projects face tricky 2015

Thenew year is approaching, and so are big decisions around liquid natural gas projects in Nova Scotia.

Developers have promised to give a green light or pull the plug on the provinces front-runner LNG proposals in 2015.

However, the companies behind the Goldboro and Bear Head facilities have both seen a flurry of recent developments that have analysts scratching their heads over what to expect.

Pieridae Energy Ltd., the developer of the Goldboro facility, in October became the first Canadian LNG project to ask the U.S. government for approval to export American natural gas through Canada.

On Tuesday, Bear Head LNG Corp. followed suit.

It will likely take months for the applications to be processed. If theyre successful, it would be years before either project would open.

Room for two survivors?

Both companies will be watching the uncertain European market for natural gas and also keeping an eye on each other, since there may not be room for both to survive.

I think all of the proposed projects in Nova Scotia are going to struggle to get customers, said Tony Regan, an energy consultant with Tri-Zen Ltd. in Singapore who has been watching Canadian LNG projects.

There are far too many proposed projects, particularly in North America, trying to attract buyers attention and there is just not enough demand to support more than a handful of these projects.

The situation looks worse because the past few months have seen oil and gas prices fall, said Regan. Nova Scotia exports should have an advantage in Europe, because the shipping distance is so short. But now countries all over the Atlantic are focusing more on the European market, he said.

When they start doing engineering studies ... you can tell they're starting to get more serious.- Carlos Murillo

How much can Europe really absorb? he said.

A lot will depend on what happens in Europe and the United States, said Don MacIver, an economist at Saint Marys University. He said he thought LNG is still a solid option for Nova Scotia.

Europe is an enigma right now, said MacIver.

You have to add to the complexity the fact that the U.S. has a heck of a lot of shale gas coming onstream.

20-year German deal still on

Despite the competition, Pieridae Energy had already found a buyer for half its output, signing a 20-year agreement with one of the worlds biggest power companies, Germanys E.ON.

However, last week E.ON announced that it was drastically changing its structure to focus on renewable energy. Oil, coal, nuclear and gas operations would be spun off into a different company.

The change wont affect plans or long-term projections for the Goldboro facility, said Mark Brown of Pieridae.

A spokesman for E.ON, Adrian Schaffranietz, said the company is more committed than ever to the Goldboro deal, underscoring its intention to make its energy trading more global in order to minimize risks and seize market opportunities in different continents for the benefits of its customers.

Within Canada, west-coast LNG projects get most of the attention, but both Nova Scotia projects are more advanced, said Carlos Murillo, a researcher at the Canadian Energy Research Institute in Calgary.

When they start doing engineering studies ... you can tell they're starting getting more serious, said Murillo.

Construction starting in 2015?

Bear Head and Goldboro have environmental assessments done and scores of permits ready.

With all the necessary Canadian approvals in place or on the way, and the American application submitted, the company could start operating in late 2018 or early 2019, said project director John Godbold in a news release.

The company has said it will make a final investment decision in 2015 or possibly early 2016, but that time line could speed up, as Godbold said this week that construction could begin in 2015. It expects to hire 700 people for construction and up to 75 permanently.

Pieridae Energy has committed to making a final investment decision in 2015, and has said it could open for business in 2020. It estimates hiring 3,500 people for construction and 200 permanently.