European buyers discuss shipping Canadian LNG through the Panama Canal as a diversification of supply

Two sources with knowledge of the situation said that European 'buyers', including Germany's Uniper are looking into the possibility of buying liquefied gas from Canada on the Pacific coast, and shipping it via the Panama Canal as part of a strategy to diversify the'supply'. This effort has become more urgent since the 'Iran 'war'. Three sources claim that European buyers have held commercial discussions with Canada's Ksi Lisims LNG. The terminal is a proposed liquefied gas export facility whose supporters are working to finalize agreements with potential purchasers in order to make a final investment decision expected this year.

According to two sources, Ksi Lisims is attracting interest from European clients, including the state-owned German energy company Uniper. This is because Canada's growing LNG export industry will be better suited for supplying Asia, and costs are likely to increase due to tolls and longer shipping times through the Panama Canal. Canada's LNG export capacity, both existing and new, is concentrated on its west coast. This allows for quick shipping to Asian buyers. The east coast of the country has little infrastructure, aside from Repsol's Saint John Terminal. The lack of infrastructure is a major barrier for Canada to supply any significant amounts of LNG to Europe. A?source familiarized with the Ksi LIsims LNG Project said that the Middle East conflict has caused European buyers to consider accepting the higher costs and longer transit times of shipping through Panama Canal, in order diversify their supply source?to a democratic, stable jurisdiction like Canada.

The source stated that "since the start of the war in Iran, there has been a strong interest from LNG buyers from all over the world, including Europe, in the (Ksi Lisims)." Uniper declined to comment. In March, it was reported that the German firm was in discussions with Canada on a corporate and politic level to increase its purchases of liquefied gas. Two sources claim that 96% of Germany’s LNG imports came from the United States last year. Ksi Lisims has potential to diversify this supply.

The Ksi Lisims Project is not a quick fix to Europe's energy problems. Even if the proponents, Houston-based Western LNG, a consortium consisting of Canadian natural gas producers named Rockies LNG, and the Nisga'a First Nation who owns the land for the Ksi Lisims project, decide to proceed, the construction will take several years. The Canadian government has referred the project to the major projects office of Canada for a fast-track. Mark Carney, the Prime Minister of Canada, has been trying to accelerate natural resource project permits to boost an economy threatened by U.S. trade policy.

Shell and TotalEnergies already have signed LNG purchase agreements for 20 years with Ksi Lisims. Canada's Energy and Natural Resources minister said that German companies were looking to swap and buy Canadian LNG cargos in August. Sources said that they were also interested in receiving shipments of Canadian LNG.

Canadian LNG is one of the lowest-risk products in the world, according to Charlotte Power, the spokeswoman of Canada's Minister for Energy Tim Hodgson, who has been touring the world recently, pitching Canada as a reliable and democratic energy supplier.

Power wrote in an email that "as our allies across Asia, Europe and beyond look to improve their energy security, and reduce their reliance on coercive agents, Canada stands out in the LNG market as a preferred partner."

Jamie Heard said that the Iran war, and the resultant Strait of Hormuz closing, have made it more likely that the?Ksi Lisims project will be built. Tourmaline Oil, one of Rockies LNG's partners, is behind the project. He noted that Western Canadian natural-gas prices are still below the U.S. benchmark. This makes a compelling business case for Canadian LNG.

Heard stated in an interview that "the economic rationale exists, and these projects can be paid off very quickly with spreads of this level." (Reporting from Amanda Stephenson, Calgary; Additional reporting by Christoph Steitz, Marwa Rashad and Nick Zieminski; Editing by Caroline Stauffer & Nick Zieminski).

(source: Reuters)