by Barbara Pike

The petroleum industry actually began in Atlantic Canada. It was Abraham Gesner, a Nova Scotian, who first distilled kerosene in the 1840’s, thus earning his page in history as the “Father of the Petroleum Industry”. Unfortunately, the opportunity and potential of his discovery were lost to Gesner through a fight over patents and royalties.

The petroleum industry has come a long way since Gesner’s kerosene replaced whale oil as the fuel of choice. From distilling coal, to distilling oil, to processing natural gas – it has been one long list of invention and innovation. Arguably, the next great light on the horizon is Liquefied Natural Gas (LNG), and once again Atlantic Canada has the opportunity to be at the leading edge.

LNG is natural gas cooled to -160 degrees Celsius making it a liquid, and reducing its volume by about 600 times, which takes a lot less space to transport. This liquefied gas is brought by specifically designed tankers from remote locations around the world to regasification plants, converted back to the gaseous state, and then pumped into pipelines to customers.

It’s not new, but its potential is only now being realized as technology improves making it cheaper, safer and more accessible. That timing couldn’t be more opportune for LNG in North America, and three projects now in the works in the region are hoping to be part of the action.

The Irving Oil/Repsol terminal (called Canaport LNG) in Saint John, NB, and Anadarko’s terminal at Bear Head, NS, are among the few in North America to receive environmental and regulatory permits to begin construction. Keltic Petrochemical’s proposal for Goldboro, NS, is working its way through the environmental review process, and has already signed a supply agreement with Netherlands-based Petroplus International B.V.

Too often governments hype such mega-projects in terms of jobs. Yes construction of the LNG terminals will answer the cry for jobs, and it is thousands of jobs, but those jobs are short-term. Once operational, the plants will employ upwards of 50 people, not enough to put a dent in the region’s unemployment rate. It is the potential after construction, the opportunity after the ribbon cutting, that could prove the true worth of LNG to the region’s economy.

LNG could provide energy supply diversification as well as competitively priced and environmentally friendly fuel options for Atlantic Canada’s future electricity generation. In addition, the long term benefits of access to diversified and more competitive energy supplies could increase Atlantic Canada’s competitiveness overall. But there are obstacles that need to be removed, and time is running out.

It is true Atlantic Canada is well positioned for LNG terminals. It sits on the doorstep to one of the fastest growing markets for natural gas, the northeastern United States, and it is connected to that lucrative market by an existing pipeline that has excess capacity.

But the Atlantic Canadian projects are facing stiff competition. There are more than 50 regasification terminals proposed for construction in North America in a market that experts expect can only absorb a fraction of that number. To be up and running at the very cusp of this emerging industry thus provides a precious “first mover advantage”. The competition among those 50+ to get it built and get it built first is fierce.

While the local terminals have had to go through a maze of regulatory approvals through three levels of governments, those in the United States are getting government help. The help isn’t in the form of cash, it’s in cold hard currency of another kind. It’s called co-operation and coordination, not a phrase that’s thrown around much by industry on this side of the border.

In August 2005, Washington passed an energy bill making the Federal Energy Regulatory Commission the final arbiter in the location of LNG terminals, thus streamlining the process and increasing the likelihood of projects receiving the necessary permits. The precedent for co-operation and coordination has already been set in the US. In May 2005 approval was given for an LNG project in Weaver’s Cove, Massachusetts, after key stakeholders and regulators worked together to review the proposal, thereby setting the groundwork for other US project approvals.

The proposed projects north of the border have not been the recipient of such concerted largesse. In AIMS’ recent paper Casting a cold eye on LNG, author Angela Tu-Weissenberger concludes “the Atlantic provinces and the federal government should create a coordinated approach to support the projects in the regulatory process.”

She says, “Atlantic energy ministers should extend regional cooperation on energy matters to include specific LNG opportunities.”

So the opportunity can be lost if the provinces don’t act in unison to embrace the long term benefits access to LNG provides for the region as a whole. It is also critical these plants be able to sell into the lucrative US market without fear of being pulled into a “Canada first” vacuum by national regulators. The reality is that there isn’t much market for natural gas in Atlantic Canada, but that hasn’t stopped provinces in the past from trying to use the regulatory process for short term political gain at the expense of the economy’s long-term health.

As the provinces review and revamp their energy policies, they need to ensure regional cooperation in energy matters includes specific LNG opportunities. There is potential, but it is in the big energy picture – hydro, LNG, oil. This could be an energy-rich region in an energy-starved world, but only if governments in the region put in place the right policies to encourage it.

Canaport LNG and Anadarko are over some major hurdles with the onerous environmental review and regulatory process complete. Both have broken ground on their facilities. The details of supply, transportation and market have been determined or are being negotiated. Both facilities expect to be operational by the end of 2008. Keltic Petrochemicals is at the beginning of a comprehensive study under the Canadian Environmental Assessment Act (CEAA), and it could be a year before it makes it to the end of that environmental review process. It has a supply agreement, but it is unlikely the plant will be operational before 2010.

However, the experts suggest the North American market can only absorb perhaps another eight terminals, yet there are more than 50 proposed projects on the books. What are the odds that all three local proposals will make it to the final eight? It’s a question the market will answer. If the answer is less than three, the region’s focus has to remain on the big picture because a turf war could be costly. The strategy for LNG can not be “all three or nothing”, it has to be “one for all and all for one.”

LNG does provide an opportunity, but as with any opportunity there is a time limit and time is running out. Cooperation and coordination should be the battle cry, or we can lose it all. Atlantic Canada has a chance to make Abraham Gesner’s story purely historical, not prophetic.

Barbara Pike is the Director of Communications at the Atlantic Institute for Market Studies (AIMS). She arrived at AIMS after almost five years with the Canada-Nova Scotia Offshore Petroleum Board. Previous to her current career, Barbara spent more than 20 years as a journalist with such agencies as CBC and The Canadian Press covering politics, business and natural resources throughout Atlantic Canada.