Seven Generations Energy Ltd. is about to succeed where some of the energy industry's biggest companies have failed.
Industry sources say the Alberta Montney gas producer has signed a supply deal with U.S. LNG producer Cheniere Energy Inc. that will see growing production from its Kakwa River project exported from a Louisiana port.
The foray by Seven Generations, which has not previously been reported, is a coup for the Calgary-based company as it seeks to bypass export snarls that have confounded rivals and contributed to depressed prices for the heating fuel.
It comes as multibillion-dollar export plants proposed for British Columbia's northern coast have stalled indefinitely, bogged down by political and environmental wrangling as well as high costs and unfavourable market conditions. Those plans are backed by integrated oil giants Royal Dutch Shell PLC, Chevron Corp. and state-run Petronas of Malaysia. They are among 20 or so projects pitched for the Pacific coast.
The terms of Seven Generation's supply deal were not known. A spokesman said the company does not comment on commercial arrangements for competitive reasons. However, the arrangement is part of a broader marketing push by the company that sees a bigger supply role for the fuel in power generation and chemical manufacturing.
"The rationale is just to get as many different markets going for your gas as possible," said Brook Papau, managing director at RS Energy Group in Calgary.
"It's like Seven Gen, from a marketing perspective, is trying to become an integrated oil company, but for gas."
Last fall, the company bought capacity to ship gas from the Chicago region as far as the U.S. Gulf Coast on Kinder Morgan Inc.'s NGPL system. It said the two-year term, for 100,000 MMbtu per day, would open "a path for potential exports to the global LNG market and Mexico."
Meanwhile, Houston-based Cheniere in February said it recently signed its first supply deal with an unidentified Canadian producer as it seeks to diversify sources for its Sabine Pass facility. The terminal began LNG shipments last year and is the first U.S. export plant outside Alaska.
Exports of Canadian energy from U.S. shores have drawn criticism in recent years, most notably from former president Barack Obama. He criticized TransCanada Corp.'s Keystone XL pipeline as being primarily a route for exporting Canadian crude rather than meeting U.S. energy needs, a characterization the company disputed.
More recently, the Canadian industry has been on edge over fears of a possible border tax contemplated by U.S. Republicans, and protectionist sentiment in general under President Donald Trump.
Canada's natural gas producers face added pressure in the form of fierce competition in their traditional markets from low-cost shale production in the United States.
This week, TransCanada reached a long-term deal with producers to ship gas east from Alberta on its cross-country mainline system, removing uncertainty over future deliveries to the key Southern Ontario market.
It provides sorely needed relief for producers with limited alternatives, Mr. Papau said. "Their second-best option is really to not have a customer, and that's a pretty big issue for any business, let alone the natural gas industry," he said.