Shell Canada Ltd. and its trio of Asian energy partners have asked Canadian regulators for approval to build a facility near Kitimat, BC, that would be capable of exporting up to 24 million tons/year (MMt/y) of liquefied natural gas (LNG) beginning in 2019. The proposed facility is double the size of the one Shell announced in May.
As envisioned, the facility at full capacity would be able to export up to 3.4 Bcf/d, which is about 25% of Canada’s entire natural gas production in 2011, according to the National Energy Board (NEB).
If approved, LNG Canada Development Inc. would be far and away the largest gas export terminal in North America. Shell and affiliates of Korea Gas Corp. (Kogas), Mitsubishi Corp. and PetroChina Co. in May had unveiled plans to develop a 12 MMt/y export facility, which was to be the biggest export project on the continent (see Daily GPI, May 16).
Initially the terminal would be built to export 12 MMt/y, “with an option to expand the project to a total of four units or 24 MMt/y,” said Shell spokesman David Williams. “The application is an important milestone in the regulatory process and assures that there are sufficient natural gas reserves in Canada to meet domestic needs and exports.”
According to the application filed on Friday with the NEB, Shell envisions building up to four processing trains, each able to produce 6 MMty of LNG. The proposed terminal would include gas liquefaction, LNG storage and marine loading facilities.
The first train is proposed to start up in 2019 with the second train following six months later. Trains three and four “could be commissioned in six and 12 months, respectively, after the commissioning of Train No. 2,” Shell stated in its application.
“The project owners fully intend to construct and operate the LNG terminal to its full capacity of 24 MMt/y, recognizing that the precise scheduling of construction of the last two trains will be influenced by such considerations as construction labor efficiencies and the build-up of market demand.
“While the anticipated nameplate capacity of each train will be approximately 6 MMt, the project is in the front-end engineering and design phase and the capacity of 6 MMt has a plus or minus 5% accuracy,” the application stated.
Gas supplies would be transported to the terminal by a C$4 billion, 700 kilometer-long pipeline built by TransCanada Corp. named Coastal GasLink (see Daily GPI, July 9).
LNG Canada now is 100% owned by Shell. The project partners intend to have a shareholding agreement in which Shell would operate and own 40% of the initial two-train project, while Kogas, Mitsubishi and PetroChina each would have a 20% stake. The joint development agreement provides intentions to establish a joint venture to “pursue further development” of trains three and four.
In a 52-page report submitted with the Shell application, Canadian energy consultant Roland Biddle assessed the export plan and determined that it was “unlikely to cause Canadians difficulty in meeting their energy requirements at fair market prices.”
The proposed export volume “is assessed to be small in proportion to North American energy and gas markets.” Biddle was retained by Shell to prepare the assessment to determine how the export project would impact both Canadian and U.S. gas markets.
Approval of the project, wrote Biddle, “is unlikely to result in extraordinary demands being placed on Canadian gas supply because the LNG plant will come on stream in stages; some of the gas supply to the plant will come from new production; the market will anticipate and dampen price volatility resulting from the removal of flowing gas from the market; and will as well provide mechanism to enable gas users to moderate any associated price effects.”
Shell has not disclosed the cost of the proposed terminal. However, in a conference call on Friday TransCanada CEO Russ Girling suggested that the facility could cost around C$12 billion, which would be in addition to the C$4 billion Coastal GasLink pipeline.
“If you think of a project of this magnitude…the pipeline isn’t the driving factor in a project like this,” Girling said. “The major factor is the C$12 billion LNG facility that needs reliable supplies every day.”
NEB already has given the green light to two LNG export facilities that would be built in the Kitimat region.
BC LNG Export Co-operative Ltd., also known as the Douglas Channel Energy Partnership, already has received NEB approval, as well as a 20-year license to export up to 250 MMcf/d (1.8 MMty of LNG) from a floating merchant terminal near Kitimat (see Daily GPI, April 11; Feb. 6). KM LNG, a partnership between affiliates of Apache Corp., EOG Resources Inc. and Encana Corp. also was granted a 20-year license late last year by NEB to export up to 1.4 Bcf/d from Bish Cove, near Kitimat (see Daily GPI, Oct. 17, 2011).
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