Science

LNG Canada Raises Bar for Gulf Coast Projects

LNG Canada Raises Bar for Gulf Coast Projects

Similarly, RBC Capital Markets said "the test for Canada LNG will be whether Shell can deliver the project on the stated budget, without cost increases and on time".

Now that Shell and its partners in the $31 billion LNG Canada project have made a decision to proceed with the investment on Canada's West Coast, it could become more hard to make the economic case for greenfield LNG export proposals on the U.S. Gulf Coast.

The project was approved by all its stakeholders - Shell, Malaysian state-owned oil major Petronas, PetroChina, Korea Gas Corp (KOGAS) and Japan's Mitsubishi Corp.

Russia's Novotek also appears close to taking a final investment decision on its nearly 20-million-tonne-a-year Arctic 2 project, and there are also two ventures in east Africa that may be approved in the not too distant future.

"Adding such a massive new source of (greenhouse gases) means that the rest of our economy will have to make even more sacrifices to meet our climate targets".

Natural gas is already B.C.'s biggest source of industrial carbon pollution.

"LNG Canada has not received approval from its joint venture partners on their final investment decision", Susannah Pierce, LNG Canada's director, external relations, told NGW September 30.

Canada is committing US$ 200m in federal support to the LNG Canada project for infrastructure and marine and environmental protection. Liquefied natural gas is gas that has been compressed to be transported.

Shell said construction of the project at Kitimat in British Columbia will start immediately, with first LNG expected before the middle of next decade.




The LNG facility will be built in Kitimat, British Columbia.

"Gas in Western Canada should be quite competitive", said Feer. "There are specialized components that need to be imported".

Consultancy Wood Mackenzie pegged initial project costs at US$18 billion for the LNG plant investment and $3.5 billion for the pipeline to service the facility, which will be built by TransCanada.

What the step-change in LNG did make more hard was financing new LNG projects, which typically cost billions of dollars, take at least five years to build and have long payback periods for investors.

He said a significant portion of the LNG Canada investment will be spent on a plant manufactured overseas, with steel sourced from other countries.

But neither are likely to help Trans Mountain, the troubled oil pipeline project that has epitomized the country's inability to get big projects done and for which Prime Minister Justin Trudeau needs to find a buyer if it's ever to get it built.

Ogen-Toews said the string of LNG project cancellations in recent years disappointed her.

"We like this announcement which when complete will double the number of export partners Canada has for natural gas (from one to two) and provide an incremental 1.8 billion cubic feet per day of takeaway capacity", National Bank Financial analysts wrote in a research note.

"The momentum behind LNG Canada reflects the drastic improvement in the LNG market over the past 12 months, driven by buoyant demand in China".


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