Shell exec: Atlantic Canada LNG projects face tough hurdle

A Shell executive cooled some of the growing optimism for Canada’s first two liquefied natural gas projects when he suggested Atlantic Canada was too far from U.S. customers.

Without specifically naming either the Irving Oil-Repsol facility in New Brunswick or Anadarko’s Bear Head venture in Nova Scotia — both of them due on stream in 2007 and eying markets in the U.S. Northeast — Shell US Gas & Power president Jose Alberto Lima said development of LNG terminals on Canada’s East Coast faces a tough job overcoming high transportation costs.

Despite the proponents’ efforts to reduce those costs, Limo said it will be difficult to win over gas producers.

He told reporters at a Calgary conference that the gas owners are anxious to find the cheapest way to access markets, which means minimizing transportation, regasification and other costs.

Limo said Shell is only interested in doing business with regasification projects that are sited as close as possible to the markets they want to serve.

Despite the opportunity to access the Maritimes & Northeast pipeline from Nova Scotia’s offshore Sable field to New England, he said the transportation costs are rated as “extremely high.”

Neither Irving-Repsol nor Anadarko have yet made any announcements of deals with gas suppliers.

Anadarko plans a C$450 million terminal with initial capacity of up to 1 billion cubic feet per day, while the Irving-Repsol partnership is budgeting C$750 million to start at 500 million cubic feet per day and double output over time.

—Gary Park