PetroCan may delay LNG plant without supply deal

NEW YORK (Reuters) - Petro-Canada (PCA.TO: Quote, Profile, Research, Stock Buzz) could delay its C$1 billion ($945 million) liquefied natural gas plant in Quebec if it is unable to strike a supply deal with Russia's Gazprom OAO (GAZP.MM: Quote, Profile, Research, Stock Buzz), its chief executive said on Tuesday.

Gazprom can take advantage of a seller's market in LNG and look for the most lucrative destinations for its future supply, a turnaround from when the Gros-Cacouna regassification plant was first proposed, Petro-Canada CEO Ron Brenneman told the Reuters Energy Summit in New York.

"We're sort of pacing the development of the re-gas terminal at Cacouna, so we're not getting ahead of ourselves from a supply point of view," Brenneman said.

"So if the supply doesn't line up, then we'll just put things on ice for a while and see if the market turns around."

However, in April, Gazprom put Petro-Canada on a short list of four companies to help it build an LNG plant on the Baltic Sea.

Gazprom executives said they planned to pick one or two equity partners in July.

Petro-Canada and 50-50 partner TransCanada Corp. (TRP.TO: Quote, Profile, Research, Stock Buzz) aim to build the 500 million cubic feet a day Gros-Cacouna plant on an island in the St. Lawrence River by as early as 2011.

The gas would be shipped to consumers and businesses in Quebec, Ontario and the Northeastern United States.

For Petro-Canada, it would be its second LNG operation. It operates a small such business in Trinidad.

Brenneman pointed out Gazprom did not short-list any companies planning terminals on the U.S. Gulf Coast, showing it prefers the northern part of North America, where shipping costs are lower and market access greater.

Petro-Canada is also looking for other supply options. Even if it forges an agreement with Gazprom, that supply will not account for the full capacity, Brenneman said.

"The other options we're looking at are for topping up to full capacity. So if Gazprom fell out, could we increment these other options up to the point where we're comfortable? I don't know." he said. "I think this will all become a lot clearer for us probably by the end of the year."

($1=$1.06 Canadian)

(For summit blog: summitnotebook.reuters.com/)