Nova Scotia LNG project decision delayed due to market conditions, COVID-19

Pieridae Energy Ltd., the company planning to build a $10-billion LNG export facility in Nova Scotia, says it will delay making a final investment decision expected this fall because of depressed global LNG markets and the COVID-19 pandemic.

Meanwhile, CEO Alfred Sorensen said the company is continuing to lobby the federal and provincial governments for financial help to build Goldboro LNG, which would produce about 10 million tonnes of super-cooled liquefied natural gas per year.

"There is no doubt there is a significant oversupply of LNG in the marketplace today, but our primary customer, Uniper, remains very committed to our project," Sorensen told a conference call Thursday, referring to Germany's largest utility company, which has contracted to buy about five million tonnes of LNG per year from the project.

"We are building for the future, not for the current economic situation."

He said the recent cancellation or delay of several LNG projects around the world will mean less competition when Goldboro LNG starts operation in late 2024 or early 2025.

Pieridae announced last July it would delay a decision on proceeding with the project until the end of September 2020. It said Thursday it is now in negotiations with Uniper to extend the investment decision deadline to June 2021.

On the call, Sorensen compared Goldboro LNG's short-term financial needs with TC Energy Corp.'s Keystone XL pipeline, which was approved to be built last month after the Alberta government agreed to inject $1.5 billion in equity and provide a loan guarantee.

"When we look at what Alberta just did with Keystone, we face a lot of similar issues," he said, adding Pieridae needs a much smaller injection of about $1 billion to ensure the project is built.

He said he wouldn't sell the project to government.

"We're looking for a hand up, not a hand out," he said.

Delay not a huge surprise

In a report, analyst Darrell Bishop of Haywood Securities said the LNG delay was expected, adding Pieridae's current stock price doesn't include any value for the proposed project.

"News of the delay should not come as a huge surprise in light of global events, and the current glut of global LNG [and hence low prices]," he said.

At mid-afternoon, the stock was down about 8.8 per cent at 36 cents a share.

Canada's LNG industry has had a difficult time getting off the ground.

The $40-billion Royal Dutch Shell-led LNG Canada project on the West Coast is the only one in full construction mode — although it has reduced the size of its construction workforce at Kitimat, B.C., by more than half to help local communities deal with COVID-19.

In March, Woodfibre LNG developer Pacific Oil & Gas Ltd. said it would delay construction expected this summer on the much smaller project southwest of Squamish, B.C., for a year due in part to the COVID-19 pandemic.

Panned purchase

Pieridae reported a net loss attributable to equity holders of $25.9 million or 18 cents per share in the fourth quarter of 2019, compared with a net loss of $8.8 million or 17 cents in the same period of 2018.

Revenue net of royalties jumped to $60 million from $2.4 million as it added 29,000 barrels of oil equivalent per day through its $190-million purchase in October of southern Alberta natural gas assets from Royal Dutch Shell.

The purchase has been panned by landowners and environmentalists who fear Pieridae doesn't have the financial strength to safely operate and reclaim the almost 300 sour gas wells, dozens of pipelines and three gas processing plants it bought.

But Sorenson said he's confident the transfer of licences from Shell will be approved by the Alberta Energy Regulator in the few weeks, adding Pieridae has already agreed to a well abandonment program.

He said the regulator may require a joint cash deposit by Shell and Pieridae, which his company is prepared to pay.