Shell Canada Energy, an affiliate of Royal Dutch Shell plc, has announced it has taken a final investment decision (FID) on LNG Canada, a major liquified natural gas (LNG) project in Kitimat, BC, in which Shell has a 40 percent working interest. With LNG Canada’s joint venture participants also having taken FID, construction will start immediately with first LNG expected before the middle of the next decade.
Shell’s 40 percent share of the project’s capital cost is within the company’s current overall capital investment guidance of US$25 to $30 billion per year.
“We believe LNG Canada is an attractive investment opportunity in a strong joint venture, with companies that have deep LNG industry experience,” said Maarten Wetselaar, Integrated Gas and New Energies Director, Royal Dutch Shell. “In the last two years, LNG Canada has improved its competitiveness, reduced execution uncertainty and gained significant stakeholder support. Together with our joint venture participants and contractors, we look forward to working with the local community, First Nations, government and the LNG Canada team to build and operate this game changing project for Canada’s energy industry.”
According to Ben van Beurden, CEO, Royal Dutch Shell, “Supplying natural gas over the coming decades will be critical as the world transitions to a lower carbon energy system. Global LNG demand is expected to double by 2035 compared with today, with much of this growth coming from Asia where gas displaces coal. LNG Canada is well positioned to help Shell meet the growing needs of customers at a time when we see an LNG supply shortage in our outlook. With significant integration advantages from the upstream through to trading, LNG Canada is expected to deliver Shell an integrated internal rate of return of some 13 percent, while the cash flow it generates is expected to be significant, long life and resilient.”
LNG Canada is a long-life asset that will initially export LNG from two processing units or “trains” totaling 14 million tonnes per annum (mtpa), with the potential to expand to four trains in the future. It is advantaged by access to abundant, low-cost natural gas from British Columbia’s vast resources and the relatively-short shipping distance to North Asia, which is about 50 percent shorter than from the U.S. Gulf of Mexico and avoids the Panama Canal. The LNG export facility will be constructed using proven industry technology on a large, partially developed industrial site with an existing deep-water port, roads, rail and power supplies.
LNG Canada is a joint venture comprised of Shell Canada Energy (40 percent), an affiliate of Royal Dutch Shell plc, and PETRONAS, through its wholly-owned entity, the North Montney LNG Limited Partnership (25 percent); PetroChina Canada Ltd., a subsidiary of PetroChina Company Limited (15 percent); Diamond LNG Canada Ltd., a subsidiary of Mitsubishi Corporation (15 percent); and Korea Gas Corporation, through its wholly owned subsidiary Kogas Canada LNG Ltd. (5 percent). It is operated through LNG Canada Development Inc.
TransCanada Corporation will build, own and operate the Coastal GasLink pipeline that will be built to connect upstream gas supply to the LNG Canada plant. TransCanada has more than 65 years of experience as a pipeline owner and operator with over 90,000 km of installed gas pipelines in North America.
The joint venture of JGC-Fluor Corporation has been selected as the project’s engineering, procurement and construction (EPC) contractor and brings extensive experience. JGC has delivered 48 LNG trains globally, and Fluor has 60 years of construction experience on complex hydrocarbon projects in Canada.