Oil and gas: Nova Scotia’s liquefied natural gas terminal plan shelved due to drop in demand

A proposal to spend between $750 million and $900 million to bring huge liquefied natural gas container ships to the east coast of Nova Scotia has been shelved.

Maple LNG general manager Derek Owen said Tuesday a plan to build a three-tank terminal in Goldboro, N.S., – about 200 kilometres east of Halifax – will not go ahead due to a lack of demand in Canada and difficulties in obtaining supply.

Owen said Dutch-based parent company 4Gas BV has decided to drop a land option with the municipal government in Guysborough County, and will not proceed with an engineering phase.

He said the decision was based on a fall in natural gas prices that was more severe and prolonged than his company had originally expected.

“The price of gas is considerably lower than two-and-a-half years ago,” Owen said in an interview.

“The magnitude of it (the price drop) wasn’t foreseen even by the so-called analysts and experts.”

Owen estimated that had the project proceeded it would have brought ashore 750 million cubic feet of gas per day, about double the current supply from the Sable Island gas fields.

The gas might also have provided feedstock for a proposed petrochemical plant being planned by Nova Scotia-based Keltic Petrochemicals.

Kevin Dunn, the president of Keltic, said in an interview that there was also a challenge in obtaining supplies, as higher prices for natural gas in Europe and Asia diverted the container ships that carry the fuel away from North American terminals.

He had hoped for the construction of a facility where petrochemical production would employ hundreds of Atlantic Canadians, and create a new industry in the region.

“It’s a disappointment to everyone in Nova Scotia,” he said.

Dunn estimated that about $20 million was spent by the two companies developing the project and applying for approvals to date.

Angela Tu Weissenberger, an economist based in Calgary, said the North American supply of natural gas has been boosted by new technologies allowing its extraction from shale.

She studied the East Coast LNG proposals two years ago for the Atlantic Institute for Market Studies, and predicted that unconventional gas production would reduce their chances of proceeding.

“When a lot of these LNG terminals were being proposed they really thought that natural gas was going to be on the decline and they would require additional imports to meet demand,” she said.

“It’s not happening.”

Meanwhile, a downturn in the U.S. economy has reduced demand in some industries, along with fuel conservation programs.

Owen said federal and provincial environmental permits for the project will remain in force until 2011 and 2012.

A hoped-for expansion of the Sable natural gas project has also been shelved.

ExxonMobil announced in July that an analysis had shown it was not economical to remove gas from smaller offshore reservoirs.

The low price of natural gas was also cited as a factor in that decision