Gas Processing & LNG is Produced by Gulf Publishing Holdings LLC



LNG Canada signals the return of mega-projects

LONDON/HOUSTON/SINGAPORE,  – Speaking after Shell, Petronas and their partners announced FID for LNG Canada this morning, Dulles Wang, director, North America gas, said: “This is the first LNG export project to reach FID in Canada and the first greenfield LNG export project globally in five years.

Lng Canada
 

 

“We estimate initial project costs at $18 billion for the LNG plant investment and $3.5 billion for the pipeline. Upstream costs will be incurred by each of the project partners.

“This would make LNG Canada the biggest project sanction globally since the Tengiz expansion (FGP-WPMP) was approved in 2016, and the biggest greenfield project to be sanctioned since Yamal LNG in 2013. It seems that mega-projects are back.”

He added: “Shell’s motivations for the project are clear: without this project, the company’s upstream, LNG contract portfolio and LNG production was set to go into decline early next decade.

“Instead, this allows the company to extend LNG leadership and provides a platform for growth. It also meets wider company goals of adding reserves and building North American unconventional exposure where Shell is underweight compared to ExxonMobil and Chevron.

“For all the partners, it is also a signal of growing confidence in the LNG market. Western Canada is strategically well located for supplying North Asia and will add supply and price diversity to each of the partners’ LNG portfolios. The partners also seem confident about the prospects for expansion, which should come at a substantially lower cost.

“The project will be viewed as a confidence booster for the broader investment sentiments for Canada, particularly given recent challenges with oil-related infrastructure projects. Fiscal and regulatory supports from provincial and federal government have played crucial roles in the evaluation process.

“The momentum behind LNG Canada reflects the drastic improvement in the LNG market over the past 12 months, driven by buoyant demand in China. A clutch of projects are vying for FID, including four mega trains in Qatar, Arctic LNG-2 in Russia, at least one development in Mozambique and several US projects.

“We believe 2019 could be the busiest year of LNG FIDs ever.”

Mr Wang added: “The sanction of LNG Canada marks an abrupt turnaround from 2017, when Petronas cancelled its Pacific NorthWest Project and Shell postponed an FID on LNG Canada in 2016.

“Since then, market fundamentals have moved in the project’s favour: LNG fundamentals have improved, upstream wells have outperformed, LNG construction costs have come down and tax breaks and import duty exemptions have been secured from provincial and federal governments, allowing the project partners to gain confidence, ultimately culminating in the announcement.”

LNG Canada is an equity project, as the partners will source gas from western Canada – principally the Montney play in British Columbia – and  transport it via the proposed Coastal GasLink pipeline (100% owned and operated by TransCanada) to the liquefaction facility in Kitimat.

Each partner will be responsible for marketing its equity LNG. Phase one will see the construction of two trains with a combined capacity of 14 million tonnes per annum (tpa). A second phase could double that, longer-term.”

He added: “Canadian upstream operators have improved productivity and efficiency tremendously over the last few years as the core areas of the British Columbia Montney witnessing EUR improvements as much as 60% and breakeven reduction of US$0.40-$0.80 per million British thermal units (Btu) over the last 12 months.

“The majority stakeholders of LNG Canada, such as Shell and Petronas, own some of the lowest-cost acreage in the region but monetisation for the gas domestically has not be very profitable given the supply glut in western Canada and intensified competition against plays such as Marcellus and Utica within North America.”


Copyright © 2018. All market data is provided by Barchart Solutions. Futures: at least a 10 minute delay. Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice. To see all exchange delays and terms of use, please see disclaimer.

                                  CMEGroup                                     Icelogo

FEATURED COLUMNS

Editorial Comment
-Adrienne Blume
As discussed in the HPI Market Data 2019 report, published in November by Gas Processing & LNG’s sister publication, Hydrocarbon Processing, rising propane and ethane supplies in the US have been enabled by greater production of shale gas.
Industry Trends: Norway targets global LNG market
-Eugene Gerden
Norway aims to become a leading player in the global LNG market during the next several years through the establishment of new, large-scale LNG terminals.
Regional Focus: Challenges of scaling up Africa’s LNG production
-Shem Oirere
Several gas projects are underway in Africa, but they continue to be constrained by inadequate infrastructure, slow finance mobilization, lack of security and uncertainty over hydrocarbon regulations that are casting doubt on the outcome of the continent’s drive to meet its anticipated 128% gas demand increase by 2040.


GasPro 2.0: A Webcast Symposium

Register Now

The global LNG industry is becoming increasingly interconnected as grassroots export projects get off the ground. Another technology route for processing gas into fuels—GTL—is attracting renewed attention due to improving economics. Small-scale solutions for both LNG and GTL are at the forefront of new technological developments, while major projects using more conventional technologies continue to start up around the world.

During this webcast, we will focus on LNG, GTL, gas processing technology developments and deployments, operations, small-scale solutions, transportation, trading, distribution, safety, regulatory affairs, business analysis and more.

October 25, 2018 08:30 AM CDT

Register Now

 

Please read our Term and Conditions, Cookies Policy, and Privacy Policy before using the site. All material subject to strictly enforced copyright laws.
© 2018 Gulf Publishing Holdings LLC.