Vancouver Sun

The next cycle of LNG investment­s may be poised to kick off in Canada

- STEPHEN STAPCZYNSK­I

The next LNG investment cycle may be primed for a liftoff.

Royal Dutch Shell Plc and its partners are set to announce a final investment decision on their $40-billion (US$31 billion) liquefied natural gas terminal in Western Canada as early as next week, Bloomberg reported Wednesday. This would be the first FID for a greenfield, onshore project since Corpus Christi LNG in May 2015, according to Fauziah Marzuki, an analyst at Bloomberg NEF (BNEF).

“We think 2019 could be the biggest year of LNG FIDs ever,” Nicholas Browne, an analyst with Wood Mackenzie Ltd., said by email.

The decision may be the start of a wave of investment­s for major gas export projects after a supply glut and a price collapse forced the three-year hiatus. Booming demand growth means that 11 projects, including LNG Canada, are likely to receive FID by the end of 2019, according to BNEF.

“The sanctionin­g of LNG Canada would mark a potential turning point in the LNG market, signalling the industry’s appetite to invest has returned,” Saul Kavonic, Credit Suisse Group AG’s director of Asia energy research, said by email. “Even new large scale greenfield projects are back on the agenda, after a dearth of project FIDs over the last few years.”

LNG Canada’s decision was put off twice in 2016, but the outlook for LNG has brightened. Demand is expected to grow rapidly due to an uptick in consumptio­n from Asian nations, led by China.

The market is seen flipping to a deficit as soon as 2022 absent new projects, according to Sanford C. Bernstein & Co.

The LNG Canada investors — Shell, Mitsubishi Corp., Malaysia’s Petroliam Nasional Bhd., PetroChina Co. and Korea Gas Corp. — are set to make a final decision soon, and preparatio­ns are underway for an Oct. 5 announceme­nt and event 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 said.

With the capacity to eventually export as much as 26 millions tonnes per year, primarily to Asia, it would also be one of the world’s largest LNG terminals.

The progress in Canada contrasts with potential speed bumps in the U.S., as a burgeoning trade war with China is seen potentiall­y choking off investment­s from the Asian nation, the world’s fastest-growing gas consumer. Beijing earlier this month slapped a 10-per-cent tariff on American LNG imports, which is seen shifting Chinese investment­s to projects in other countries including Canada, Australia, Qatar and Russia.

Several projects are poised to take FIDs over the next two years, including Russia’s Arctic LNG, Golden Pass and Calcasieu Pass in the U.S, as well as four units in Qatar and at least one plant in Mozambique, according to Wood Mackenzie’s Browne.

While LNG Canada hasn’t signed any major offtake agreements yet, it isn’t seen impeding investment.

The project investors “are well establishe­d LNG players. It is likely they will be the primary offtakers for the volume,” said BNEF’s Marzuki.

Each of the five partners already produce gas in Canada and will take LNG cargoes in proportion with their ownership stake in the projects, which they can earmark for short-term, long-term or spot contracts as they see fit, Andy Calitz, chief executive of LNG Canada, said in an interview earlier this month.

 ?? TODD KOROL FOR NATIONAL POST ?? The LNG Canada project, with Andy Calitz at the helm, above, is expected to get the green light as early as next week, which could usher in a wave of investment­s for major LNG projects.
TODD KOROL FOR NATIONAL POST The LNG Canada project, with Andy Calitz at the helm, above, is expected to get the green light as early as next week, which could usher in a wave of investment­s for major LNG projects.

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