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Shell poised to approve $40B LNG terminal, say insiders

Don Horne   


Royal Dutch Shell Plc and its partners are set to announce a decision on their $40 billion liquefied natural gas terminal in western Canada as early as next week, amid signs the companies are poised to approve it, according to people familiar with the plans.

Preparations for an Oct. 5 announcement followed by an LNG Canada event and fireworks at the local golf club the next day are underway in Kitimat, B.C., the site of the proposed project, said people with direct knowledge of the activities, who asked not to be identified. The situation is fluid and timing could change, the people told Bloomberg News.

LNG Canada — backed by Shell, Mitsubishi Corp., Malaysia’s Petroliam Nasional Bhd., PetroChina Co. and Korea Gas Corp. — would be Canada’s largest-ever infrastructure project. With the capacity to eventually export as much as 26 millions tons per year, primarily to Asia, it would also be the largest new LNG terminal to be sanctioned in years.

“We are currently reviewing the decision support package that LNG Canada submitted to joint venture participants,” Shell Canada said in emailed response to questions from Bloomberg News late Tuesday. Shell declined to comment on the announcement date and whether a final decision has been made.


The group has long said an investment decision will be made this year. British Columbia has set a Nov. 30 deadline for a final decision if the project is to claim as much as $6 billion in tax breaks and savings.

The project may also get a boost from the Canadian government in the form of tariff relief, the Globe and Mail reported Wednesday. The government has agreed to waive import duties on steel needed for the terminal, saving the companies about C$1 billion, the paper said, citing people familiar with the plan. The LNG group had sought relief from the duties, arguing that the steel for the massive terminal couldn’t be sourced in Canada. The government is now confident the operators will give the project a green light this year, the Globe said.

“We are hopeful that Shell will make a positive investment decision which will lead to the creation of thousands of jobs,” said Pierre-Olivier Herbert, spokesman for Finance Minister Bill Morneau. “There is due process in place for the remission of surtaxes in the event that there is no domestic supplier, and that process must be followed.”

The LNG decision was put off twice in 2016 amid a global supply glut, but the outlook for LNG has brightened. LNG imports will set a new record this year of 308 million metric tons per year, up 8.5 per cent since 2017, Bloomberg New Energy Finance forecast on Sept. 12. Half of that growth will come from China and the remainder largely from Japan, South Korea and India, the London-based researcher said.

“The overall conditions for LNG Canada to go ahead in 2018 are quite good,” Andy Calitz, chief executive officer of the project, said in an interview in Vancouver this month. “That is, and feels, so very different to 2016 when the project was delayed.”

LNG Canada would be a welcome boost for Canada’s energy sector. In May, Trudeau agreed to pay $4.5 billion to buy the Trans Mountain oil pipeline from Kinder Morgan Inc. after the company balked at proceeding with construction. In August, the Federal Court of Appeal nullified approval of the project. All that follows years of tortured regulatory reviews — 35 per cent of Canada’s proposed LNG capacity has been canceled and an additional 40 per cent is under review, Bloomberg New Energy Finance said in a Sept. 10 note.

“The Trans Mountain decision, impactful as it has been in Canada on the regulatory scene, has not in any way stopped the LNG Canada project, which is ongoing,” Calitz said.

(Bloomberg News)


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