Massive LNG project in Canada gets green light from homeowners

SINGAPORE / VANCOUVER (Reuters) – A massive liquefied natural gas export project in Canada has been endorsed by its partners, said LNG Canada, making it the first major LNG project approved in the US. world for five years.

The first gas from the project is expected before 2025, in order to meet the expected sharp increase in demand for cleaner fuel from hungry Asian buyers, mainly from China.

LNG Canada is the largest infrastructure investment in Canadian history and its construction is a vital boost to the governing Liberals, Prime Minister Justin Trudeau, who fought against the exodus of World oil sands majors of Alberta and a series of setbacks in the construction of an expansion pipeline on the west coast of Canada.

The project will allow LNG to be shipped to Asian markets much faster than from the US Gulf Coast.

Royal Dutch Shell, Malaysia Petroliam Nasional Bhd [PETR.UL]North Korea, PetroChina Co Ltd, Korea Gas Corp and Mitsubishi Corp. made their final investment decision, said LNG Canada on its website.

Shell announced that construction of the project in Kitimat, BC, would begin immediately, with the first LNG expected before the middle of the next decade.

Mitsubishi said the total cost of developing the future Kitimat LNG plant is about 14 billion US dollars. Previous estimates of the total cost of the project estimated it at about C $ 40 billion ($ 31 billion).

Shell said the project will initially export LNG from two treatment plants or trains, for a total of 14 million tonnes a year, with the potential to expand to four trains in the future.

PetroChina and Kogas approved funding for the project late last week, while Shell, Petronas and Mitsubishi made their announcements on Tuesday.

APETITY INCREASES

LNG Canada is the first large-scale conventional greenfield LNG project to make a final investment decision (FID) since 2013, said Saul Kavonic, director of Asia-Pacific markets and head of research. at Credit Suisse in Australia.

"We see LNG Canada's IDF reporting that the appetite for investing in LNG is back," Kavonic said.

Project owners will be responsible for providing their own natural gas supply. They will each capture and market their share of LNG, LNG Canada said in its release. In the past, project owners typically used long-term sales and purchase agreements with end-users to finance their operations.

The construction decision also comes amid a Sino-US trade niche that has led China to impose tariffs on LNG shipments from the US, threatening US President Donald Trump's energy dominance plan. .

Energy consulting firm Wood MacKenzie said it appeared that the project partners had made every effort to reach an investment decision. Competitive projects have progressed in Qatar, Russia, Mozambique and the United States.

"I do not see this as a case of replacing US cargo, but rather as a way to meet the projected growth in demand," said Nicholas Browne, an analyst at Wood Mackenzie.

WoodMac expects global demand for LNG to increase from 290 million tonnes in 2017 to almost 450 million tonnes in 2025.

"This equates to a phenomenal growth of 50%. So there certainly exists a demand for the new LNG, "said Browne.