Mitsubishi joins Canadian LNG project

Olive Hawkins
October 7, 2018

Royal Dutch Shell, which has a 40% working interest in the project, is banking on global demand for LNG to double by 2035, much of it driven by Asian markets where natural gas is expected to replace coal use.

LNG Canada is the largest private-sector investment project in Canadian history, Prime Minister Justin Trudeau said at a news conference in Vancouver.

Getting the LNG project off the ground could be considered a win for the Trudeau government, which has struggled to get major energy projects built in Canada.

"There will come a day when traditional energy sources will give way to new energy sources, just as coal gives way to LNG", Trudeau said. "They must go together".

Shell chief executive Ben van Beurden said his company believed LNG Canada was "the right project, in the right place, at the right time" as the world transitions to a lower carbon energy system.

"LNG Canada's FID would signal the appetite to invest in LNG is back", said Saul Kavonic, director for Asia Pacific markets and head of energy research at Credit Suisse in Australia.

Dale Dusterhoft, CEO of Trican Well Service Ltd., one of Western Canada's largest oil and gas services firms, says he doesn't expect any increase in drilling in the next year or so but the demand will start to expand gradually after 2020 as LNG Canada's completion date nears.

"It will be significantly challenging for all of us but with the revenue, some $23 billion coming to the province from this project, we will be able to innovate, work with renewables, work with Shell and the joint venture partners to bring down emissions over the long term".

The partners in the project are energy giant the Royal Dutch Shell Group, Mitsubishi Corp of Japan, Malaysian-owned Petronas, PetroChina Co and Korea Gas Corp. All five primary investors have signed off on the project. "It is very, very hard to do, and requires teamwork".

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Mitsubishi said the total estimated development cost of the planned Kitimat LNG plant is about US$14 billion. The cost for the liquefaction plant and a 670 kilometre pipeline to connect gas to the plant will exceed 2 trillion yen ($17.6 billion), a company official said.

The United States could become the largest LNG exporter in the world by 2025 as almost a dozen new projects seek regulatory approval, King said, but he added Canada can compete because the Canadian West Coast is much closer to customers in Asia and its gas supply is cheaper.

He added that the project will not face trade barriers.

The country's state-owned entities are also increasingly active in helping other countries develop infrastructure for LNG facilities meant for local consumption of the fuel.

The joint venture of JGC-Fluor Corp has been appointed as the project's engineering, procurement and construction contractor.

The project includes TransCanada's $4.8-billion Coastal GasLink pipeline, which will take natural gas from Northeast the facility in Kitimat, where it would be liquefied and exported to Asia. Smaller pipeline companies including Pembina Pipeline Corp will also benefit, said RBC analyst Robert Kwan.

A final investment decision for the whole project is expected in the next few days, according to a report in Canada's The Globe and Mail.

"B.C. taxpayers will subsidize its power by paying rates twice as high and taking on the enormous public debt required to build Site C. There may be as little as 100 permanent jobs at LNG Canada".

The project owners will provide their own natural gas supply and will individually market their share of LNG, LNG Canada said in the statement.

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