CALGARY • In another setback for the Canadian liquefied natural gas industry, the U.S. Federal Energy Regulatory Commission has denied an application to build a pipeline to supply gas to a proposed LNG project.
Calgary-based Veresen Inc. has been trying to sign up customers for its proposed Jordan Cove LNG plant on the coast of Oregon, but confirmed this week the project still had yet to sign its first major off-take agreement.
“We will provide some guidance to the market as we get a little closer and get our first buyer signed up,” Veresen president and CEO Don Althoff said during his company’s earnings call on Thursday.
On Friday, the FERC cited that lack of customers as the reason for denying a permit for the Pacific Connector pipeline that would link natural gas supplies to the Jordan Cove project.
FERC commissioners wrote an order that said the “authorization for commencement of construction would not be granted until the Pacific Connector has successfully executed contracts for a certain level of service.”
The order also said it would not issue a certificate to allow the project to proceed “in what we find to be the absence of a demonstrated need for the pipeline.”
The decision will likely come as a surprise as Althoff indicated the company expected a positive outcome from FERC “in due course” for its Jordan Cove project, which is designed to deliver 6 million tonnes of LNG per year to utility companies in Asia.
Althoff did not say when Jordan Cove would be sanctioned on Thursday, and Veresen did not respond to a request for comment Friday afternoon.
Analyst Steven Paget of FirstEnergy Capital said the news was “shocking” but perhaps should not have been given the regulator’s duty to ensure need before giving approval.
‘It’s a huge surprise. I thought approval was very likely’
“It’s a huge surprise,” he said. “I thought approval was very likely.”
LNG project proponents have had a difficult time securing buyers following the dramatic collapse in both global energy prices. Natural gas prices are linked to oil prices in many Asian markets.
In February, Calgary-based AltaGas Ltd. announced it was shelving its Douglas Channel LNG plant indefinitely because the company was unable to find customers in Asia for its natural gas.
“The Douglas Channel consortium has been unable to secure meaningful off-take agreements for the project,” AltaGas CEO David Cornhill said.
Financial Post with a file from the Calgary Herald