Shell delays FID on LNG Canada project

Kitimat project is 'FID ready and has not been cancelled' says LNG Canada CEO Andy Calitz

In October 2015, LNG Canada CEO Andy Calitz told the Vancouver Board of Trade that Shell and its partners planned to make a final investment decision in 2016. | Nelson Bennett

Shell Canada and its partners are backing away from their promise to make a final investment decision on the massive LNG Canada project in Kitimat by the end of this year.

Shell said it is not shelving the project – estimated to be worth $40 billion to $50 billion, including the pipeline that is needed – and said it still “remains a promising opportunity.”

But LNG Canada CEO Andy Calitz said Shell and its partners – Mitsubishi, PetroChina, Kogas – have unanimously agreed to delay an FID until market conditions improve. The FID was expected to be made by the end of 2016.

“Given the challenges of the global energy market, our joint venture participants…have decided to delay a final investment decision on LNG Canada,” Calitz said in a teleconference call.

The company will continue site preparation work for the LNG site in Kitimat, Caltiz added.

“The project in Canada is FID ready and has not been cancelled,” he said.

The decision raises the specter of Premier Christy Clark – who has invested considerable political capital on the jobs to be created through a multi-billion dollar liquefied natural gas industry – heading into a spring election in 2017 without any significant LNG project that she can point that has been given the financial green light.

The only other large LNG project that is close to the finish line, in terms of regulatory approvals and financing, is the Petronas Pacific NorthWest LNG in Prince Rupert, which has been delayed by Ottawa.

It too was expected to have a final investment decision in 2016. Petronas has not officially stated whether it too will delay an FID.

But in June, Energy Services BC president Dave Turchanski told his members that, according to a source in Petronas, the decision is now not expected until mid-2017.

The Canadian Environmental Assessment Agency only recently resumed a review of the Petronas project.

In a report in June, the International Energy Agency (IEA) said delays in final investment decisions on large LNG projects were to be expected, due to a variety of factors, not the least of which is that the prices for LNG in Asia have fallen by about half since the Canadian projects first started the lengthy environmental review processes.

- With files from the Alaska Highway News

nbennett@biv.com