Repsol abandons plans for an LNG terminal on Canada’s east coast

According to the company’s announcement on Thursday, Repsol has opted against building a liquefied natural gas (LNG) facility on Canada’s east coast because carrying the gas there would be too expensive.

As part of a global effort to secure alternate supplies of Russian gas in the wake of the invasion of Ukraine, the Spanish corporation Repsol had been considering building an LNG export facility in Saint John, New Brunswick, to supply European markets.

Nevertheless, to get to the terminal, gas would need to be transported hundreds of kilometers from western Canada, necessitating the construction of new pipeline capacity across northeastern U.S. states and Canadian provinces that have historically opposed fossil fuel development.

Josu Jon Imaz, CEO of Repsol, stated last summer that the business would require new pipeline infrastructure, tolling agreements, and a buyer to commit to a 15- to 20-year offtake arrangement to deliver the gas to the Atlantic coast.

Last year, as gas prices skyrocketed in response to Russia’s invasion of Ukraine, European nations rushed to find new sources of supply. In an effort to speed up deliveries to Europe, German Chancellor Olaf Scholz visited Canada in August.

Repsol and privately held Pieridae Energy were in discussions with the Canadian government earlier in 2022 about advancing their LNG projects on the east coast. Still, Ottawa’s backing was ebbing even before Scholz’s visit. According to a representative for Canada’s Natural Resources Ministry, Repsol has advised the Canadian government that there is no commercial justification for an east coast port.

Natural gas rises in the future

With the publication of a pessimistic weekly EIA storage report relative to projections and averages, natural gas prices are reversing earlier gains, up 1.6% at $2.479/mmBtu. According to a US government agency, gas stockpiles decreased by only 58 billion cubic feet last week. This is far less than the 62 bcf loss predicted in a WSJ survey and the 77 bcf decline seen on average over the previous five years. With 1.972 trillion cubic feet, the total amount of storage has increased from a 0.3% deficit just three months ago to a 24% above-average surplus.

As investors anticipate the weekly EIA storage report at 10:30 am ET, which is anticipated to show that a bearish inventory excess is continuing to increase compared to the five-year average, natural gas prices rise 2.7% to $2.504/mmBtu. According to a WSJ survey, a 62 billion cubic foot withdrawal is expected, less than the typical 77 billion cubic footfall and reflecting relatively low heating demand last week due to moderate temperatures in Texas and much of the South. If the predictions come true, total inventories would increase from the present 22% surplus to 24% above normal. From the start of the week, gas futures have risen by 3%.

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