German Chancellor Olaf Scholz wants Canadian liquified natural gas (LNG) to play a “major role” in his country’s transition from Russian-supplied natural gas.
Prime Minister Justin Trudeau has said Ottawa is willing to ease regulatory hurdles to help that happen. However, he also questions the “business case” for exports to Europe from the East Coast, including the hurdle of long-distance transportation.
Kevin Krausert is CEO and co-founder of Avatar Innovations, a Calgary-based venture capital firm and startup accelerator that pairs entrepreneurs with the biggest companies in Canada’s energy patch. He says the business case is “a lot stronger and a lot faster than our Prime Minister suggests.”
“Today, you have an existing, operating LNG import terminal in New Brunswick operated by Repsol, the Spanish super major, that could be turned around quickly,” he told Yahoo Finance Canada’s Editor’s Edition. “There’s a lot of gas on the East Coast that wouldn’t have to transport that far.”
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Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
JEFF LAGERQUIST: You know, appreciating everything that the prime minister just said about the complications of moving gas around, how do you view the business case for exports from the East Coast to Europe?
KEVIN KRAUSERT: A lot stronger and a lot faster than our prime minister suggested in that clip. Not only have you had the number of these projects on the books, currently today you have an existing and operating LNG import terminal in New Brunswick operated by Repsol, the Spanish supermajor, that could quickly be turned around. And the argument of transporting gas from East Coast to West Coast, there's a lot of gas in the East Coast that wouldn't have to transport that far to be able to do it.
So it's not-- where one makes money in the LNG game is really through arbitrage pricing. So for example, if you have, as we do today, $50 to $90 gas in Europe. And currently in Alberta we have $2.50 gas. In New York you have $9 gas.
You have a $40 to $50 minimum arbitrage of value creation that one could catch. That seems like a pretty compelling business case to me to deliver value to an investor and also politically help an ally in need. So I respectfully disagree pretty strongly with that assessment.