Canadian natural gas poised to become a viable alternative to coal-fired power plants around the world

By Bruce Lantz

A highly anticipated liquefied natural gas export facility planned for Canada’s east coast won’t be going forward due to a lack of affordable supply.

But two others might.

Repsol S.A. (REP:BE), which had planned to develop an LNG export facility in Saint John, New Brunswick, to supply European markets, recently announced that the cost of transporting natural gas to the terminal was too high. The gas would have to travel thousands of kilometres from western Canada but the pipeline capacity does not currently exist for it to do so.

“. . . following a study carried out by the company, it was determined to not continue with the Saint John liquefaction project as the tolls associated to it made it uneconomical,” Repsol spokesperson Christi Shafer told Resource World Magazine. She declined to answer further questions.

The Energy East pipeline proposed by TC Energy Corporation (TRP-TSX; TRP-NYSE), formerly TransCanada, in 2013 would have carried 1.1 million barrels per day to the East Coast, which spends more than C$3.5 billion annually on oil from Saudi Arabia. But objections from Quebec along with a change in the federal government, regulatory delays and a decline in global oil prices resulted in TransCanada abandoning the project in 2017. In 2018 the federal government purchased the Trans Mountain pipeline which rekindled interest in a pipeline to the East Coast, but government bureaucracy and continued objections from Quebec (which ironically has no problem receiving more than half its crude oil from western Canada) continue to make a pipeline to the east merely a dream.

However, the company that scrapped plans to build a C$13-billion land-based LNG facility in Goldboro, Nova Scotia due to cost pressures and difficulty getting financing, considered a floating alternative to meet overseas demand but has returned to its original plan, shelved in 2021.

Calgary-based Pieridae Energy Ltd. (PEA-TSX) was going to build a facility on a floating barge to meet the demand created as European countries seek to impose sanctions against Russia and isolate it in response to the conflict in the Ukraine. The company viewed this as a way to provide natural gas overseas for 20-30 years, removing the threat of Russia shutting off its supply, while capitalizing on rising prices.

But now Pieridae is in discussions with the federal government about how to move the project forward.”The world has changed a lot since then, Pieridae CEO Alfred Sorensen told CBC News. “We have to take advantage of all the work we’ve done already and try and see if we can move the project forward very quickly.”

The land-based project is favoured because it could produce more gas than a barge-based facility, and the federal government is now interested in maximizing output and could offer a combination of regulatory and financial support, he said. Three significant hurdles remain, Sorensen said: indigenous reconciliation issues; finding a new engineering, procurement, construction and commissioning partner; and achieving the needed upgrades to existing pipelines. He said the best outlook would have gas flowing from a Goldboro facility starting in January 2027.

Meanwhile the Bear Head Energy LNG project in Point Tupper, N.S., recently acquired by Texas Energy company Buckeye Partners LP, could have a new lease on life, after being mothballed after 15 years of planning due to difficulties getting gas suppliers and customers on board.

“Nova Scotia’s unique geographical characteristics give the region the potential to become one of the most productive renewable and green energy development areas in the world,” Buckeye CEO Todd Russo said in a news release at the time of the acquisition. “Via this acquisition, it is our intention to develop a large-scale energy production, distribution and export hub that will offer our customers lower-carbon energy solutions, including LNG or other green fuels.”

The time is right for Canada to make the most of its natural gas riches as a viable alternative to coal, says a recent Canadian Chamber of Commerce report, which urges the federal government to finally get serious about building the infrastructure needed to fast-track the extraction and export of LNG. The carbon credits clause of the 2015 Paris climate accord could drive such growth, with Canadian natural gas poised to become a viable alternative to coal-fired power plants around the world, the report says.

“This initiative could not only support natural gas exports but an array of services, technology, and materials exports,” wrote Eric Miller, president of the D.C.-based Rideau Potomac Strategy Group, the report’s author.

“Canada should use the global carbon market framework to build a stronger Canadian natural gas sector and a cleaner world.”

Canadian natural gas has distinct advantages. It’s plentiful, cleaner than coal, and it’s produced under Canada’s carbon-price regime which could create a market premium as demand for cleaner fuel sources continues to rise. It could support the switch from coal to gas around the world, but there are many challenges. Canada lacks the necessary infrastructure such as pipelines and export terminals, especially on the east coast. Since 2008, 18 new LNG terminals have been proposed — three in Nova Scotia, 13 in B.C. And two in Quebec. — but only one, in Kitimat, B.C. Is anywhere near completion. The report says that’s due to government’s “lack of decisiveness” on energy policy.

“Had Canada supported the construction of even a fraction of these terminals, it would have been at the centre of support for growing Asian and European markets that are in desperate need of LNG and would be actively contributing to the displacement of coal,” Miller said.

The report also identifies the need for a better pipeline network, which would also be adaptable to the future use of hydrogen as a modern low-carbon alternative to fossil fuels. It also notes that in addition to investing in hydrogen research, the federal government should examine what would be involved and what the cost would be in converting gas infrastructure to hydrogen.

Nova Scotia is ready, according to the government.

“Nova Scotia is open for business,” Patricia Jreige, spokesperson for the Department of Natural Resources and Renewables, told Resource World. “We are well positioned to export energy like natural gas or green hydrogen to Europe given our proximity to markets and our deep, ice-free ports. Green hydrogen is a clean-burning fuel and natural gas is cleaner than coal so it can help with the transition to clean energy.

“Both can help Nova Scotia and other countries achieve their climate change goals. We welcome companies that want to invest in these areas in Nova Scotia.”