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NorthAmOil COMMENTARY NorthAmOil
proposed. Most of these projects were proposed for the country’s West Coast, and aimed to take advantage of Canada’s shale reserves in the Montney and nearby plays.
However, the collapse in oil and gas prices, combined with a flood of new LNG supply onto global markets, made a number of project developers reconsider the economics of their proposals, with some terminals being scrapped altogether. The most high-profile of these was Pacific NorthWest LNG, which was cancelled in 2017 by a consortium led by Malaysia’s Petronas. The project had been widely considered to be the front-runner prior to its cancellation.
Progress
Petronas did not pull out of Canada’s nascent LNG industry altogether, and subsequently bought a 25% stake in the Shell-led LNG Can- ada project in May 2018. That project proceeded to reach FID in October 2018 and construction on the terminal is now under way, with start-up targeted in 2023.
There are also expectations that at least a handful of other West Coast projects will even- tually go ahead – and Fortis BC’s small-scale Til- bury LNG plant already exports some shipments to China, though this project is often overlooked given its small size.
Goldboro LNG, which is estimated to cost $7.5bn before financing and owner costs, stands out among Canadian LNG export projects, however, given its location. Pieridae also ben- efits from having a $4.5bn guarantee from the German government. Meanwhile, Germany’s Uniper is signed up as the sole offtaker for all of the output from Train 1 at Goldboro, which will amount to 5mn tpy, over a 20-year period from the project’s start-up, pegged for 2023.
Germany does not yet have LNG import terminals of its own, but three such proposed projects are moving forward. This includes a proposal by Uniper Global Commodities in Wilhelmshaven, which is expected to come
online in the second half of 2022.
According to Pieridae’s documents, 1.5mn
tonnes of LNG sold to Uniper must land in the Netherlands, from where it will be shipped to Germany by pipeline after being regasified.
Pieridae said the Shell deal would now allow it to begin to leverage $1.5bn of the German government’s guarantee for the upstream gas production portion of its project. The remaining $3.0bn of the guarantee will cover the construc- tion of the terminal itself.
Germany’s commitment to the Goldboro project illustrates Europe’s commitment to securing new sources of gas supply. This comes as a number of countries on the continent are trying to reduce their dependence on Russian gas, while European domestic production is declining. The fact that the Netherlands is now intending to halt production at Groningen, Europe’s largest onshore gas field, by 2022, eight years earlier than previously planned, is exacer- bating longer-term supply worries.
But European supply concerns could pro- vide a boost to Goldboro LNG. Earlier this year, Swiss utility Axpo Holding said it had taken 1mn tonnes of capacity from Train 2 at Goldboro and was negotiating a binding LNG sale and pur- chase agreement (SPA). Pieridae also said previ- ously that it had preliminary deals with “another European utility and a trading company” for 2mn tpy, though further details have not yet emerged.
The company said earlier it expected most of the remaining capacity to be used for spot sales in Europe or LNG bunkering on North Ameri- ca’s East Coast and truck loading. Pieridae views Southern Europe and South America as second- ary markets, followed by Asian markets.
Those involved in the project will now await news on the completion of the engineering, procurement and construction (EPC) contract for Goldboro. No timeline has been given by Pieridae, but it appears likely that this could come soon.™
Germany’s commitment to the Goldboro project illustrates Europe’s commitment to securing new sources of gas supply.
Week 42 22•October•2019 w w w . N E W S B A S E . c o m
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