Nova Scotia and New Brunswick face end of domestic supply of natural gas

Homes and businesses that use natural gas in Nova Scotia can expect price hikes when the province's offshore supply dries up in the next two years, according to the region's pipeline company.

Mike Whalen of Maritimes and Northeast Pipeline says there is plenty of cheap natural gas in Western Canada and the United States, as well as pipelines to get it here.

But that cheaper gas will not offset the increased pipeline charges to move it into the region.

"The big question is whether the local markets can bear this cost increase," Whalen told an energy conference Wednesday.

"We know our supply is running out domestically. We know the table is set to bring gas north to us from the U.S. But will the markets be able to bear this increase?"

That was the issue before an expert panel convened Wednesday by the Maritimes Energy Association in Halifax. The industry is grappling with what happens after the ExxonMobil-led Sable Project winds down by 2020.

Encana's Deep Panuke field is also being decommissioned.

What is being done

Nova Scotia's natural gas utility, Heritage Gas, has secured two long-term transportation contracts to bring cheaper gas into the province and is pushing ahead with its Alton project near Stewiacke, N.S., to store natural gas bought when prices are cheap in the summer for use in winter.

"We're feeling optimistic," Whalen said. 

But Heritage Gas president John Hawkins acknowledged uncertainty remains over the cost of pipeline tolls when Exxon exits the Maritimes.

Exxon's backstop agreement — a long-term guarantee to purchase space on the pipeline — expires in 2019.

The agreement is the economic underpinning of the Maritimes pipeline.

Hopes for LNG, again

There are two Liquefied Natural Gas terminals proposed for Nova Scotia — one at Bear Head at the Strait of Canso and another that is further advanced at Goldboro in Guysborough County.

The Goldboro project is being developed by Calgary-based Pieridae Energy, which recently announced it had hired banker Morgan Stanley to help it raise $10 billion in equity and project financing.

An LNG terminal would bring in large volumes of natural gas, on the scale of Exxon's Sable project at its peak, according to Whalen.

"The result is our toll would plummet, the cost of moving gas through Nova Scotia and New Brunswick would decrease dramatically," he said.

He says Maritimes and Northeast also has the capacity to double the amount that passes through its system to a billion cubic feet per day by adding compression technology on its line, which runs from Guysborough to the U.S. border at St. Stephen, N.B.

"LNG export facilities would be hugely helpful to natural gas consumers," said Hawkins.

It's not the first time an LNG terminal has been proposed.

U.S. energy company Anadarko actually broke ground at Bear Head 14 years ago before getting out in 2011 as cheap shale gas flooded the market.

"If we were to come through, it's going to make a positive impact to the end user. The overall cost [of gas] should be trending downward if anything else," said Mark Brown of Pieridae Energy.

Pipeline flow already reversed 

Drastically lower production from Sable and Deep Panuke has already transformed the way gas flows in the region.

When Sable went into production in 1999, 100 per cent of the gas on the Maritimes and Northeast Pipeline flowed south toward the United States.

In 2017, gas flowed south for only 30 days. The rest of the year, it flowed into the region — and at a price that was sometimes too expensive for one of the region's biggest customers, Nova Scotia Power.

Too expensive for NSP

Nova Scotia Power's Angela Trenholm said the company increasingly burns heavy fuel, not natural gas, to generate electricity.

"We actually saw it [natural gas] hit as high as $100 per mmbtu [million British thermal units] on certain given days. And as an order of magnitude, heavy fuel oil delivered is $9 an mmbtu. So you can have gas pricing 10 times your cost of your heavy fuel oil," Trenholm said Wednesday.