OREANDA-NEWS. Gaz Metro has completed a C$118mn ($87mn) project to triple the capacity of its liquefaction plant in Montreal, which will allow the utility to sell more LNG to high-horsepower industries.

The expansion, placed in service today, increased liquefaction capacity at the facility to a gas equivalent of 9 Bcf/yr (22mn m?/yr), or about 24.7mn cf/d.

The project was partly funded by the eastern Canadian province of Quebec through its multi-billion-dollar Plan Nord economic development program. Plan Nord is designed to provide more natural gas to remote parts of northern Quebec that are not connected to the gas grid, including natural resources extractive industries.

Government-owned Investissement Quebec in October 2014 acquired a 42pc share in Gas Metro LNG, the utility's subsidiary responsible for marketing LNG, for C$50mn.

"In addition to helping us reach the ambitious targets that we set for ourselves in the Energy Policy 2030, having this type of energy available will definitely be a major incentive to draw other companies to the Plan Nord area," said Quebec minister of energy and natural resources Pierre Arcand.

Quebec's Energy Policy 2030, announced last year, seeks to reduce the province's petroleum consumption by 40pc by 2030, among other goals designed to cut carbon emissions.

The new capacity is more than the amount of LNG that Gaz Metro currently sells under a variety of short- and long-term contracts, the utility told Argus today, declining to say how much LNG it is selling.

Gaz Metro exports most of its LNG to the US northeast, where the fuel is used for winter peakshaving by local distribution companies, it said. The Everett LNG import terminal outside Boston, Massachusetts, is the main supplier of peakshaving LNG to the US northeast.

The second-largest market for Gaz Metro's LNG is the industrial sector in northern Quebec. The two other markets are trucking and marine transportation, but the momentum to convert diesel engines in those sectors to use LNG has slowed with low oil prices.

Marine transportation is currently Gaz Metro's smallest market but is expected to grow significantly because of new emissions limits on bunker fuels that will impact shippers along the St. Lawrence river waterway and the Atlantic coast, Gaz Metro said.

Gaz Metro's profit will come from liquefaction fees, which it did not disclose because its LNG sales are not regulated. It will charge a commodity price based on the spot gas price at the Dawn storage hub in Ontario and a transportation charge based on short-haul regulated rates along the TransCanada pipeline from Dawn to Montreal.

Prices at Dawn so far this month have averaged $3.27/mmBtu, up by 61pc from the average during the same time last year. Dawn prices averaged $4.08/mmBtu in December, a 50?/mmBtu premium to the US Henry Hub benchmark.

Some of Gaz Metro's current LNG customers are Stornoway's Renard mine; heavy trucks operated by several transportation companies, and a ferry operated by Societe des traversiers du Quebec.

Some future demand will come from Groupe Desgagnes, which has ordered four ships that can run on LNG, and ArcelorMittal, which plans an LNG pilot project at its Port-Cartier pelletizing plant.