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Shell green lights investment in LNG Canada

Shell Canada Energy, an affiliate of Royal Dutch Shell plc has a final investment decision (FID) on LNG Canada, a major liquified natural gas (LNG) project in Kitimat, British Columbia, Canada, in which Shell has a 40% 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% share of the project’s capital cost is within the company’s current overall capital investment guidance of US$25-$30 billion per year.

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.

— Ben van Beurden, Chief Executive Officer, Royal Dutch Shell

LNG Canada is a long-life asset that will initially export LNG from two processing units (“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% shorter than from the US 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.

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.

LNG Canada is a joint venture comprising Shell Canada Energy (40%), an affiliate of Royal Dutch Shell plc, and PETRONAS, through its wholly-owned entity, the North Montney LNG Limited Partnership (25%); PetroChina Canada Ltd., a subsidiary of PetroChina Company Limited (15%); Diamond LNG Canada Ltd., a subsidiary of Mitsubishi Corporation (15%); and Korea Gas Corporation, through its wholly owned subsidiary Kogas Canada LNG Ltd. (5%). It is operated through LNG Canada Development Inc.

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

The LNG Canada plant will be constructed under a single EPC lump-sum contract at an estimated cost of some US$1,000 per tonne of LNG.

The 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 license in place and all major environmental permits are in place for the plant and the pipeline.


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