Canaport LNG could be on auction block
Canaport LNG could hit the auction block as Spanish oil and gas giant Repsol aims to bolster its balance sheet.
The state-of-the-art liquefied natural gas terminal in Saint John, N.B., 75 per cent owned by Repsol and 25 per cent by Irving Oil Ltd., is a significant part of Atlantic Canada’s energy landscape.
Yet it’s one of a handful of assets Repsol is considering shedding after Argentina’s government nationalized one of the company’s most profitable international holdings.
The South American country expropriated 51 per cent of Repsol’s stake in YPF, Argentina’s biggest oil company, without compensation.
Repsol spokesman Kristian Rix said Monday that according to the Argentine government’s formula when YPF was privatized in the 1990s, Repsol is owed roughly $10.7 billion.
Although Repsol is pursuing legal action, the Spanish company has devised a strategic plan to shore up its books in the meantime.
Rix said the potential sale of the Canaport terminal is part of a broader strategic plan that includes investments of about $23 billion and divestment of roughly $5.5 billion.
“We’re motivated by the need to sharpen our focus on our core activities, which are exploring for oil and producing oil,” Rix said in an interview Monday from Madrid. “More pressingly we need to protect our credit rating, which was lowered after YPF was confiscated from us.”
Irving Oil did not respond to repeated calls and emails for comment on Monday.
The possible sale of the Canaport liquefied natural gas terminal in Saint John could have a ripple effect throughout the region.
John Herron, president of the Atlantica Centre for Energy, said the terminal is an important part of the region’s energy mix.
“From a regional natural gas perspective we’re going to need an array of sources to supply our own domestic needs of natural gas.”
Herron said a recent $43-million upgrade to the terminal to make it more efficient and cut down on flaring has helped Canaport adapt to “North American market realities.”
A glut of natural gas supply, fuelled by massive shale gas discoveries throughout the continent, has pushed prices to rock-bottom levels.
Herron said the overhaul to the terminal allows operators to dial back gas volumes when prices are low and quickly ramp up the amount of gas it ships when demand and prices soar.
Emera Inc. owns Brunswick Pipeline and has an agreement with Repsol Energy Canada to transport liquefied natural gas from the Canaport terminal to the United States.
But Emera spokeswoman Sasha Irving said she could not comment on a tentative plan to sell the terminal.
However, she added that the pipeline operates under a long-term take-or-pay arrangement, which assures Brunswick Pipeline a minimum payment whether the space on the pipe is used or not.
But despite low natural gas prices in North America, Herron said Repsol’s international liquefied natural gas portfolio is “immensely profitable overall.”
Yet he said given the nationalization of one of the Spanish company’s most profitable business units, “it makes sense for them to glean a fair amount of cash from one of their ancillary business units” in order to focus on exploration and refining.
“I think they are genuinely exploring whether they can obtain a significant amount of cash from the LNG holdings, but I don’t think (they have) taken a decision to sell.”
Indeed, Rix said the company’s first goal isn’t to offload assets but rather to “optimize” its portfolio.
Canaport spokeswoman Kate Shannon said in an email that the terminal received its first shipment of liquefied natural gas in 2009.
She said most of the LNG shipments come from Trinidad and Tobago or Qatar.
Once the LNG is regasified and turned back into its gaseous form as natural gas, it is sent through the Brunswick Pipeline, which connects to the Maritimes & Northeast Pipeline and is distributed to markets in the northeast U.S., Shannon said.
She added that while the terminal’s operating capacity fluctuates depending on market demands, “we produce natural gas to meet the demands of the market, whatever they may be, at any point in time.”
Fuente: Chronicle Herald