Shell gives green light to invest in LNG Canada

Shell and its partners have taken a final investment decision (FID) on LNG Canada, a major LNG project in Kitimat, British Columbia, Canada. Construction will start immediately, with first LNG expected before the middle of the next decade. It is the first LNG export project to reach FID in Canada and the first greenfield LNG export project globally in five years.

‘We believe LNG Canada is the right project, in the right place, at the right time,’ said Ben van Beurden, Chief Executive Officer, 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%, while the cash flow it generates is expected to be significant, long life and resilient.’

LNG Canada will initially export 14mn t/y of LNG from two trains, 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% shorter than from the US Gulf of Mexico and avoids the Panama Canal. The LNG export facility will be constructed on a large, partially developed industrial site with an existing deepwater port, roads, rail and power supplies.

The project was planned and designed by working closely with local communities, First Nations and governments to ensure sustainable development was considered in every aspect of the project. For example, the project has been designed to achieve the lowest carbon intensity of any LNG project in operation today, aided by the partial use of hydropower, reports Shell.

LNG Canada is a joint venture comprised of Shell (40%); Petronas, through its wholly-owned entity North Montney LNG Limited Partnership (25%); PetroChina Canada (15%); Diamond LNG Canada (a subsidiary of Mitsubishi Corporation; 15%); and Korea Gas Corporation (through its wholly owned subsidiary Kogas Canada LNG; 5%). It is operated through LNG Canada Development.

The cost to deliver LNG into Asia is expected to be structurally advantaged compared to a greenfield development on the US Gulf coast.

Each joint venture participant will be responsible for providing its own natural gas supply and will individually offtake and market its own LNG. Shell’s Groundbirch asset in north-east British Columbia can provide the majority of Shell’s equity share of natural gas or Shell will buy gas from the market, depending on which option provides the most value.

TransCanada Corporation will build, own and operate the Coastal GasLink pipeline that will connect upstream gas supply to the LNG Canada plant, while the joint venture of JGC-Fluor Corporation has been selected as the project’s engineering, procurement and construction (EPC) contractor.

The LNG Canada plant will be constructed under a single EPC lump-sum contract at an estimated cost of some $1,000/t of LNG. Construction will be a modular LNG train design using proven technology and built in Asian yards with recent experience delivering LNG modules on budget and on schedule.

The project has a 40-year export licence in place.

LNG Canada’s export facility will be constructed on a large, partially developed industrial site with an existing deepwater port, roads, rail and power supplies
Photo: Shell