‘Shocking’ setback for Jordan Cove LNG project as U.S. denies pipeline permit

CALGARY ? In another setback for that Canadian liquefied gas industry, the U.S. Federal Energy Regulatory Commission has denied a credit card applicatoin to build a pipeline to provide gas to some proposed LNG project.

Calgary-based Veresen Inc. has been trying to sign up customers because of its proposed Jordan Cove LNG plant around the coast of Oregon, but confirmed this week the project still had yet to sign its initial off-take agreement.

“We will provide some guidance towards the market as we obtain 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 insufficient customers because the reason behind denying a permit for the Pacific Connector pipeline that will link natural gas supplies to the Jordan Cove project.

FERC commissioners wrote a purchase that said the “authorization for commencement of construction wouldn’t be granted before the Pacific Connector has successfully executed contracts for any certain degree of service.”

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The order also said it would not issue a certificate to allow the project to proceed “in what we should find to be the lack of a demonstrated demand for pipeline.”

The decision will probably come as a surprise as Althoff indicated the organization expected a positive outcome from FERC “in due course” for its Jordan Cove project, that is designed to deliver Six million tonnes of LNG per year to utility companies in Asia.

Althoff didn’t say when Jordan Cove would be sanctioned on Thursday, and Veresen didn’t react to a request comment Friday afternoon.

Analyst Steven Paget of FirstEnergy Capital said this news was “shocking” but perhaps should not have been because of the regulator’s duty to ensure need before giving approval.

‘It’s an enormous surprise. I thought approval was very likely’

“It’s an enormous surprise,” he said. “I thought approval was most likely.”

LNG project proponents have had a difficult time securing buyers following the dramatic collapse in both global energy prices. Gas prices are associated with 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 that project,” AltaGas CEO David Cornhill said.

Financial Post with a file in the Calgary Herald

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