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East Coast LNG project wins large European contract

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The backers of a liquefied natural gas project on Canada's East Coast will unveil a large export contract with a major European utility firm Monday, according to people familiar with the deal, adding to momentum to make the massive Goldboro LNG export terminal a reality.

Goldboro will announce a multiyear supply agreement with E.ON AG, a publicly traded German company, in Halifax, according to sources. The deal would give Goldboro an anchor customer, making it easier to attract more business. Companies from India, for example, have been reluctant to sign agreements until infrastructure is in place.

The deal is a milestone for Canada's energy industry, with attention surrounding liquefied natural gas shifting to the East Coast from the West Coast, where companies have proposed at least six export projects. On the other side of the Atlantic, it signals how European companies are looking to ease their reliance on Russia's OAO Gazprom.

Goldboro will send roughly five million tonnes of LNG a year for 20 years to E.ON, sources said. That volume of gas equals the first phase of a proposed project in Kitimat on the British Columbia coast. One million tonnes a year is worth about $1 billion, one of the sources estimated.

Pieridae Energy (Canada) Ltd. is developing the proposed project, and expects to complete the early engineering phases and environmental assessment process this year. The proposed facility, which expects commercial operations to begin in 2020, will have the capacity to move 10 million tonnes of LNG a year. Its capital expenditures will be between $5 billion and $10 billion, according to the company.

Pieridae Energy's chief executive officer, Alfred Sorensen, is scheduled to make an announcement Monday concerning the Goldboro LNG project.

The LNG terminal is to be built in Guysborough, N.S. He did not return requests seeking comment Sunday. A spokesman for Goldboro LNG declined to comment.

Exports of natural gas from Canada's East Coast will push up North American prices for the commodity. And there are a number of natural gas fields near Canada's East Coast - both on and offshore - that would benefit from projects such as Goldboro.

Sorensen serves as Pieridae's CEO, giving the Goldboro LNG project clout. He founded Galveston LNG Inc., now known as Kitimat LNG, and sold it to Apache Corp. and EOG Resources Inc. for $300 million.

This time, however, Sorensen has his eye on serving as a supplier, too. Pieridae struck a joint venture with Contact Exploration Inc. to "source, develop and produce natural gas to serve as significant portion of the feedstock" for Goldboro, the companies said in a press release March 4.

Goldboro said natural gas supply could come from the Marcellus formation in the northeastern United States, New Brunswick and on and offshore Nova Scotia. The Sable offshore project, owned by Exxon Mobil Corp., Royal Dutch Shell PLC, Imperial Oil Ltd., Pengrowth Energy Corp. and Mosbacher Operating Ltd., could also benefit and is only 200 kilometres to Goldboro.

Corridor Resources Inc., a small operation with operations on the East Coast, also mentions Goldboro's export potential when trying to attract investors.

Goldboro hopes to attract customers in Europe, South America, and South Asia, according to marketing materials. It is a shorter distance to India off Canada's East Coast than from the British Columbia coast.

Canada does not have an LNG export facility, and hosts only one import operation - the Canaport LNG facility in Saint John. Some proposed projects in British Columbia have attracted wealthy owners, cleared some regulatory hurdles and signed shipping contracts. While the B.C. government recently formally rejected the proposed Northern Gateway oil sands pipeline to its coast, Premier Christy Clark is a fierce advocate of developing natural gas projects, as well as export terminals, in the province.

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