C’da, Russia eye US LNG market

Just as negotiations intensify over what role Western companies will play in developing LNG, Petrocan, a Canadian energy company, is looking to piggy back on Russia’s gas fields  to get into the US market. The Canadian company last week presented a paper at a Russian conference that outlined the need for LNG in North America. They were invited to do so by Gazprom, Russia’s gas giant. Gazprom chief executive officer Alexei Miller told the conference in Moscow that, billions in investment are being contemplated to allow LNG to be shipped around the world, a process that would eventually create a worldwide market for the commodity rather than the pockets of demand that now exist.”
 
“This is the beginning of the era of the globalisation of world gas markets,” he said. Gazprom is in talks with a number of large Western energy firms (including Exxon Mobil Corp, Royal Dutch/Shell Group, ConocoPhillips Co and ChevronTexaco Corp) about developing the fields that would supply LNG from Russia. Petrocan emphasised that the talks are only beginning. “It’s very early days. We’re just in preliminary discussions,” said Petrocan spokeswoman Michelle Harries. But she said LNG opportunities are very much in line with Petrocan’s basic strategy of building on its core assets and expertise, in this case the company’s operations in Trinidad and Tobago, where it already operates LNG facilities. Petrocan is also pursuing an LNG project in Qatar, another region where a local glut of natural gas offers the opportunity for profitable export.

Such moves fit in well with Petrocan’s focus on international expansion, with the most recent example being the $1.15-billion (Canadian) acquisition of a 30-percent stake in the Buzzard field in the North Sea. Wilf Gobert, vice-chairman of Peters & Co Ltd in Calgary, said any successful conclusion to the Petrocan-Gazprom negotiations will hinge on the Canadian company’s ability to strike a deal to buy Russian gas at a low enough price that it can be resold for a healthy profit in North America. He said it is unlikely that Petrocan will be able to negotiate outright ownership of any resources, although the company did not rule out that possibility. It is equally unlikely that Petrocan will settle for simply earning a fee for transporting the gas, he said. “That would be a deal breaker.” According to Gazprom, the St Petersburg facility would produce three million to five million tons of LNG a year, from gas shipped from Siberia, with exports beginning in 2010. Most of the gas would be shipped to the United States, with a small portion going to Europe, already supplied with Russian gas via pipeline.

Worldwide production of LNG is predicted to more than double to 380 million tons by 2010 from about 149 million tons this year, said an official with Algeria-based Sonatrach, the largest LNG producer. LNG facilities have proven to be controversial in North America, however. Two months ago, residents of Harpswell, Me, voted to reject a proposal by TransCanada Corp and ConocoPhillips for a $350-million (US) LNG terminal near their town.