Repsol abandons plans for an LNG terminal

As the company announced on Thursday, Repsol has chosen not to build a liquefied natural gas (LNG) facility on Canada’s east coast because transporting the gas there would be too expensive.

As part of a global effort to secure alternative supplies of Russian gas following 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.

However, to reach the terminal, the gas would have to be transported hundreds of kilometers from western Canada, which would require the construction of new pipeline capacity in the northeastern US states and Canadian provinces that historically they have opposed the development of fossil fuels.

Josu Jon Imaz, CEO of Repsol, stated last summer that the deal would require new pipeline infrastructure, toll agreements and a buyer who would commit to a 15-20 year extraction agreement to deliver the gas to the Atlantic coast.

Last year, when gas prices soared in response to Russia’s invasion of Ukraine, European nations scrambled 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 the private company Pieridae Energy were in talks with the Canadian government in early 2022 about the advancement of their LNG projects on the east coast. Still, Ottawa’s support was waning even before Scholz’s visit. According to a representative of Canada’s Department of Natural Resources, Repsol has informed the Canadian government that there is no business justification for a port on the east coast.

Natural gas rises in the future

With the release of a pessimistic EIA weekly storage report relative to projections and averages, natural gas prices are reversing earlier gains, rising 1.6% to $2.479/mmBtu. According to a US government agency, gas reserves 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. At 1.972 trillion cubic feet, the total amount of storage has risen from a deficit of 0.3% just three months ago to a surplus of 24% above average.

As investors anticipate the EIA’s weekly storage report at 10:30 a.m. ET, which is anticipated to show a bearish excess inventory continues to rise compared to the five-year average, natural gas prices rise 2.7% to $2,504/mmBtu. Withdrawal of 62 billion cubic feet is expected, according to a WSJ survey, less than the typical 77 billion cubic feet and reflects 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 rise from the current surplus of 22% to 24% above normal. Since the start of the week, gas futures are up 3%.