Shell will supply Canaport with more than one million tonnes of gas a year over the 10-year agreement.
CALGARY—Repsol is hanging on to its interest in the Canaport LNG facility, which was left out of a $6.7-billion asset sale to Royal Dutch Shell because low natural gas prices prevented it from fetching a fair price.
Shell is paying $4.4 billion for Repsol’s liquefied natural gas assets in Trinidad and Tobago and Peru, as well as a gas-fired power plant in Spain. It will assume another $2.3 billion in financial leases and debt.
However, Repsol said it will keep its 75% interest in Canaport for now.
“The North American facility is not included in the sale process as the low gas prices currently seen in the U.S. market do not allow the asset’s medium and long-term potential to be adequately valued,” Repsol said in a release. “Repsol will analyze all available operational, financial and strategic options for this asset.”
Irving Oil owns the remaining 25% stake in Canaport.
In the meantime, Repsol and Shell have signed a 10-year agreement to supply one million tonnes of gas a year to Canaport.
Tankers full of natural gas, chilled into a liquid state, arrive at Canaport, where the fuel is converted back into a gas and transported to Canadian and U.S. markets by pipeline.
It has a maximum send-out capacity of 1.2 billion cubic feet per day.
Canaport is something of an anomaly in the North American market these days, with many companies rushing to export domestic liquefied natural gas supplies abroad, rather than import the fuel from overseas.
Advances in drilling techniques have unlocked huge volumes of natural gas from shale formations across the continent, leading to a supply glut that has depressed prices for years.
Natural gas sells for several times higher in Asia than it does in North America, so companies are working on plans to export liquefied natural gas from export terminals in Kitimat and Prince Rupert, BC.
Shell, alongside three Asian partners, is among the West Coast LNG players.
Repsol said proceeds from its LNG asset sale will be used to boost production growth.
©The Canadian Press