LNG Canada ready to go

Gary Park

for Petroleum News

Royal Dutch Shell has issued the strongest message yet that it is ready to clear the barriers that have stalled Canada’s hopes for exporting LNG on a large scale.

The global giant, which controls about 40 percent of the global LNG market, reaffirmed a 2016 commitment that along with three Asian energy powerhouses it is within sight of a final investment decision for the C$40 billion LNG Canada project, allowing construction to start this year.

The consortium’s Chief Executive Officer Andy Caditz told a Vancouver conference that LNG Canada has seen strong progress since mid-2016 on the key elements underpinning commercial LNG - improvements in external market conditions, led by oil prices, free cash flow and the supply-demand balance.

Caditz also welcomed the incentives offered by British Columbia’s minority New Democratic Party government and a resolution of the Canadian government’s plan to impose anti-dumping duties of up to 45.8 percent on imports of steel components, primarily targeted at China and South Korea.

In defense of the partnership’s case for removing the import duties, a spokeswoman for LNG Canada said the partnership “believes the facts speak for themselves … large, complex modules cannot be constructed in Canada.”

She also expressed strong hope that the governments recognize the importance of LNG and project investments that support jobs and investment opportunities for First nations, along with contributing to a lower carbon economy.

B.C. Premier John Horgan unveiled measures two months ago to reduce risks for LNG proponents, notably by offering tax relief for construction and eliminating a specific income tax on the industry.

Shell has a 50 percent stake in LNG Canada, with Petro-Canada holding 20 percent and South Korea’s Kogas and Japan’s Mitsubishi each with a 15 percent stake.

The natural gas feedstock for conversion to LNG will come initially from Cutbank Ridge in northeastern B.C. that is owned 60 percent by Encana and 40 percent by Mitsubishi, and Groundbirch.

The first phase at the tanker terminal in Kitimat will have two trains designed to handle 13 million metric tons a year of LNG shipments to Asia.

Key elements in place include a partnership of Fluor Corp. and JGC Corp. which landed the C$14 billion contract for engineering, procurement and construction that is expected to take about five years to complete.

- GARY PARK