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Repsol’s Canadian LNG Import Site May Cut New England Gas Price

By Todd Zeranski

June 18 (Bloomberg) – Repsol YPF SA’s new Canaport liquefied-natural gas terminal in eastern Canada may lower spot prices of the fuel in New England, an analyst said today.

The terminal, located in Saint John, New Brunswick, can inject 1 billion cubic feet (28.3 million cubic meters) a day of natural gas into pipelines, enough to meet most of New England’s gas needs.

New supply “will displace gas and reduce Algonquin City Gate prices,” Chris Kostas, an analyst at Energy Security Analysis Inc. in Wakefield, Massachusetts, said in a telephone interview. “We don’t expect any significant price reduction anyplace further south than New England.”

New England natural gas prices typically spike during the winter, when demand for home heating and power generation rises. The spot price at the Algonquin City Gate, which is the pricing hub for Boston, hit $15.35 per million British thermal units on Jan. 14, more than triple the value of Henry Hub natural gas futures on the New York Mercantile Exchange.

The location of the terminal means that New England customers will no longer receive gas originating from the U.S. Gulf that wouldn’t reach a distant market in the case of a disruption or other event, Benjamin Palomo, Repsol’s executive director of LNG, said in an interview in New York.

“Canaport will be a very important piece in the local and regional area,” he said. “It will be received by customers that need diversification and flexibility.”

Inaugural Cargo

The terminal, Canada’s first such site, is scheduled to receive its initial cargo June 20. Repsol, Spain’s largest oil producer, owns 75 percent of the terminal, and Irving Oil Corp. owns the remainder.

Knutsen OAS Shipping AS’s tanker Bilbao Knutsen is scheduled to arrive at Canaport June 20, data compiled by Bloomberg show.

The terminal also will receive fuel from a plant in Peru that Repsol expects to be operating by July 2010, Palomo said. Canaport “is a project for the next 25 years and thereafter.”

U.S. imports of liquefied natural gas may rise 41 percent this year to 495 billion cubic feet as demand from Asia declines, the Energy Department said in a June 9 report. The U.S. imported 352 billion cubic feet of LNG in 2008 as the global recession shrank demand.

Utilities in Japan and South Korea, the world’s biggest LNG buyers, are slashing imports of the cleaner-burning fuel amid lower industrial output and electricity consumption. Demand from South Korean power producers slumped 47 percent in May as electricity sales fell, Korea Gas Corp. said on June 12.

U.S. imports are averaging 1.3 billion cubic feet per day this month, 44 percent higher than a year ago, David Pursell, managing director at Tudor, Pickering Holt & Co. in Houston, said in a June 15 note.

LNG is gas that is cooled to a liquid for transport by ship to markets not connected by pipelines. The fuel is received at import terminals and converted back to a gaseous form so it can be piped to users.

To contact the reporter on this story: Todd Zeranski in New York attzeranski@bloomberg.net

Last Updated: June 18, 2009 15:05 EDT