Royal Dutch Shell plc's decision to invest $1 billion a year in unconventional natural gas exploration in China won't alter plans to export liquefied natural gas (LNG) from British Columbia (BC) to Asia Pacific markets, according to affiliate Shell Canada Ltd.

The oil major this week disclosed that it would invest billions into China's unconventional fields, which some experts peg as the largest in the world. Shell also plans to build a $12.6 billion refinery and petrochemical complex in the country, which would be the largest foreign investment in China. Shell in March secured the first shale gas production sharing contract in China. In addition, Shell plans to move its global coalbed methane business unit to China this year to establish a worldwide unconventional oil and gas research hub, which would be its first research hub outside of Houston.

Shell China Executive Chairman Lim Haw Kuang said the oil major is committed to investing $1 billion a year over the next several years to develop China's unconventional gas resources.

"If there has been an adjustment to that pledge, it could only be an upward revision," Lim said. Securing a partner is key to developing China's natural resources. "We need to find a partner who will not only cooperate with us well for one day or two, but also share the same development vision and direction over the next few decades."

However, even with abundant unconventional natural gas reserves expected to be unearthed, Asia's gas demand over the long-term is expected to outstrip supply, a Shell Canada official said.

Shell Canada, said a spokesman, is sticking to plans to develop a 24 million ton/year (mt/y) LNG export facility near Kitimat, BC, the largest North American export facility proposed (see Daily GPI, July 31; May 16). Shell, which would operate and hold a 40% stake, is developing LNG Canada Development Inc. with Mitsubishi Corp., Korean Gas Corp. and PetroChina Co. Ltd., with each of the three Asian partners holding 20% equity.

The announced $1 billion/year investment in China's unconventional gas resources is being undertaken with China National Petroleum Corp., the parent company of PetroChina and the largest energy company in China.

"The exploration and development of shale gas is expected to grow in China, and Shell's investments, largely with PetroChina, are reflective of that growth," Shell Canada spokesman Stephen Doolan said. "However, the demand for energy in China and throughout Asia is expected to exceed domestic production.

"This demand for energy, coupled with the wider demand for LNG in Asia, which is likely to grow by more than 80 million tons per annum between now and 2020, underscores Shell's intent to continue to progress the LNG Canada project."

Apache Canada Ltd., which also is developing an LNG terminal in Bish Cove near Kitimat with affiliates of Encana Corp. and EOG Resources Inc., also indicated that Shell's decision to invest in Chinese gas would have no impact on the trio's proposed Kitimat LNG terminal and pipeline. Kitimat LNG, which has not yet been sanctioned by the partners, is conducting site preparation work and has an export license in hand from Canada to ship 5 mt/y overseas (see Daily GPI, Oct. 17, 2011).

An Apache Corp. spokesman said the Kitimat LNG project and Shell's Chinese investments are "mutually exclusive" and would have no impact on efforts to secure long-term LNG contracts with Asia-Pacific companies.

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