Cablegate: Proposed Lng Receiving Terminals in Canada

DE RUEHOT #0982/01 2032032
P 212032Z JUL 08 ZDK




E.O. 12958: N/A


Summary and Introduction

1. (U) Although Canada currently does not have any liquefied
natural gas (LNG) receiving and regassification terminals,
there are many projects under development. Canada has four
fully approved LNG import facilities, one of which is under
construction, and three proposed terminals. One additional
project, which had been approved, was scrapped after it was
unable to secure a long-term supply of LNG. Many of these
proposed LNG terminals plan to provide LNG to U.S. natural
gas markets as well as Canadian markets. However, despite
the large number of LNG import facilities under development,
their likelihood of completion is hindered by the
difficulties many are having in obtaining a long-term LNG
supplier and in navigating the long domestic approval
process. End Summary and Introduction.

Canaport, St. John, New Brunswick

2. (U) The Canaport LNG receiving and regassification
terminal is under construction and is slated to begin
operations late in 2008. Canaport LNG is a partnership
between Canada's Irving Oil Limited (25 percent) and Spain's
Repsol YPF, S.A. (75 percent), with the latter supplying the
LNG and marketing it outside Atlantic Canada. Overall
construction is 80 percent finished with 99 percent of
offshore and 76 percent of onshore construction completed.
The imported LNG will be sold in Canada and the U.S. and is
projected to supply 20 percent of the natural gas needs of
the northeastern U.S. The terminal will have an initial
send-out capacity of one billion cubic feet per day (bcfd)
and will connect to the existing Maritimes and Northeast
Pipeline (M&NP) through the 145-km Brunswick Pipeline, to be
completed in the fall in conjunction with the terminal. The
initial source of LNG will be Trinidad & Tobago, but Canaport
hopes to eventually receive supplies from Algeria and other
countries. One source of possible resistance is the design
change from a cold vent to a flare system as the proposed
safety release system. A cold vent system discharges methane
gas into the atmosphere while a flare system combusts the gas
before discharging it and will release a small amount of
carbon dioxide as a result. As part of the flare system, a
flame atop a steel skeleton will burn continuously at a usual
height of one meter. During the start-up of each LNG tank a
visible flame of 43 meters will burn for approximately 10
days. Canaport is asking for the public's comments regarding
the design change. If the project remains on schedule, it
will be the first LNG regassification terminal in Canada.

Rabaska, East-end Levis, Quebec

3. (SBU) Rabaska is a limited partnership between Gaz Metro
of Quebec, Enbridge Inc. of Canada, Gaz de France, and
Gazprom Marketing and Trading, Inc. (GMUSA) of the U.S.
GMUSA is a wholly owned U.S. based subsidiary of Russia's OAO
Gazprom and joined the partnership on May 15 when it signed a
Letter of Intent to be the LNG supplier for the project. The
LNG would come from Gazprom's Shtokman liquefaction project
which is currently under development in the central Barents
Sea, 450 km northeast of Murmansk. In May Gazprom's Deputy
Chairman Alexander Medvedev announced that 50 percent of
Shtokman's LNG exports would be sent to Rabaska. Gazprom
QShtokman's LNG exports would be sent to Rabaska. Gazprom
partners say Shtokman is scheduled to begin production in
2013, although Norwegian experts developing the nearby
Snohvit gas field do not expect Shtokman to begin exporting
gas earlier than 2015. Construction of Rabaska would be
timed to meet Shtokman's first anticipated deliveries in
2014. The LNG would be distributed in Quebec and eastern
Ontario through the Trans Quebec and Maritimes (TQM) Pipeline
which would be connected to the terminal by an approximately
42-km pipeline to be built as part of the project. The
facility would have an initial send-out capacity of 500
million cubic feet per day (mcfd). Comment: The Rabaska
project has provoked intense local criticism and several
ongoing efforts to launch legal challenges. While the
project has received federal and provincial approval, it is
not yet certain that it will move forward. End comment.

Cacouna Energy, Gros Cacouna Island, Quebec

OTTAWA 00000982 002 OF 003

4. (U) Cacouna is a joint venture between TransCanada and
Petro-Canada that has been proposed for 15 km northeast of
Riviere-du-Loup. The project does not have an LNG supplier
lined up, as potential anchor supply Gazprom announced on
February 8 that it had decided not to pursue its proposed
Baltic LNG liquefaction facility that was to be the primary
source of LNG for the terminal. The LNG would be accessible
to Quebec and Ontario as well as the northeastern U.S. and
the terminal would have an average send-out capacity of 500
mcfd. Cacouna Energy was approved by the Government of
Quebec and public opinion seems to be in favor of the
project, with a Chamber of Commerce survey showing support
from members at over 82 percent and a Cacouna Village
municipality referendum in September of 2005 showing 57.2
percent of residents in favor. Since losing its potential
supplier, however, the long-term fate of the project is in

Kitimat LNG, Kitimat, British Colombia

5. (U) Kitimat is a subsidiary of Calgary-based Galveston LNG
Inc. and is planned to be located in Bish Cove. Construction
is slated to begin in 2009 and be completed by the end of
2011. The LNG is intended for diverse North American gas
markets and would be supplied through an approximately 14-km
pipeline connected to Pacific Trail Pipelines and Spectra
Energy's Westcoast Pipeline system. It would have a send-out
capacity of 1 bcfd. Kitimat LNG is the only fully approved
LNG regassification terminal on the west coast of North
America and cites its proximity to the Alberta oil sands as
an advantage. Kitimat has not yet secured an LNG supplier
for the facility.

Energie Grande-Anse, Saguenay River, Quebec

6. (U) Energie Grand-Anse is pursuing the LNG project in
conjunction with the Saguenay Port Authority. Grand-Anse had
planned to seek government approvals in the summer of 2009
and begin construction in the fall of that year with a
completion date set for 2012, but everything has been pushed
back by at least a year as they have been unable to reach an
agreement with LNG suppliers. The terminal's initial
operation date may now be as late at 2014. The LNG would
supply Quebec, Ontario, and northeastern U.S. markets via a
linking terminal connected to the TQM Pipeline. The facility
would have a send-out capacity of 1 bcfd.

Maple LNG, Goldboro, Nova Scotia

7. (U) The Maple LNG project is a partnership between The
Netherlands' 4Gas and Suntera Canada Ltd, a joint venture
between SUN Energy and ITERA. SUN energy is the energy
investment arm of the SUN Group, a private investment group
active in Russia, India, Europe, and the U.S., and ITERA is a
Russian oil and gas company. Construction is planned to
start in 2010 with an initial delivery of gas in early 2012.
The gas would be supplied to eastern Canadian and
northeastern U.S. markets with an initial send-out capacity
of 1 bcfd and the potential to increase to 2 bcfd. The
terminal would be adjacent to the M&NP intake station at
Sable Offshore Energy Gas Plant in Goldboro. Maple LNG
received a Permit to Construct from the provincial utility
and review board on June 18, 2008 and has received federal
and provincial environmental approvals. Discussions are
Qand provincial environmental approvals. Discussions are
on-going with various parties around the globe concerning the
supply of LNG for the terminal.

WestPac LNG, Texada Island, British Colombia

8. (U) The project, proposed by Calgary-based WestPac LNG
Corporation, would be located near Kiddie Point in the Strait
of Georgia, approximately 120 km northwest of Vancouver. The
company plans to begin a regulatory review and environmental
assessment in early 2009 and begin construction in late 2010
or early 2011 with a completion date set for 2014. WestPac
would provide gas to coastal and lower mainland British
Colombia and has stated it has no plans to export gas to the
U.S. There would be on-site access to the Vancouver Island
gas pipeline and the plant would have a send-out capacity of
500 mcfd. Commercial agreements for LNG supply have not yet
been reached. Comment: The Westpac proposal has garnered a
considerable amount of protest from the local population and

OTTAWA 00000982 003 OF 003

environmental groups who do not want LNG facilities or
tankers anywhere near Texada Island. Although these
objections are in the early stages, they could mean a strong
impediment to Westpac's plans. End comment.

Bear Head LNG, Cape Breton Island, Nova Scotia
--------------------------------------------- -

9. (U) Anadarko Petroleum's LNG project was mothballed on
February 9, 2007 because the company was unable to secure a
long-term LNG supply. Construction was initiated in October
of 2004 and was scheduled to be completed in late 2008. The
imported gas was intended for northeast markets via the M&NP
at an eventual rate of 1.5 bcfd.

Grassy Point LNG Transshipment and Storage Terminal,
Placentia Bay, Newfoundland
--------------------------------------------- -----------------

10. (U) Unlike the previous proposals, Newfoundland LNG Ltd's
Grassy Point terminal would not provide for the
regassification of LNG, but would still serve as a component
of the LNG import chain by offering transshipment and storage
services. LNG could be brought on larger LNG carriers and
then transferred to smaller vessels for shipment to LNG
regassification terminals on the Atlantic coast. The project
would allow for LNG cargo transfer, short and long-term
storage of LNG, temporary vessel-based LNG storage, and a
lay-up site for in-transit LNG carriers. Newfoundland LNG
Inc., a Newfoundland and Labrador corporation, is jointly
owned by North Atlantic Pipeline Partners, L.P. and LNG
Partners, L.L.C. The project has received provincial
approval and is undergoing a federal assessment. It is
scheduled to be completed in 2010.

11. (U) Due to the uncertainty of obtaining a steady supply
of LNG along with the slow-moving nature of the proposals and
resistance towards them, only four of the 22 fully approved
LNG facilities in the U.S. and Canada are currently under
construction. Thus, while LNG importing terminals have the
potential to increase supply in the North American natural
gas market, the many challenges associated with their
development have stalled the progress of many proposed LNG

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