Shell Shelves Prince Rupert LNG

Shell has confirmed that the Prince Rupert LNG project in western Canada, which it acquired in the BG takeover in early 2016, has been shelved.

However, it told NGW that Shell retains a 50% participation in the 'LNG Canada' joint venture based in Kitimat, noting: “We will defer to LNG Canada to comment on that project.” Both LNG projects are in the province of British Columbia on Canada's Pacific coast.

Shell said that BG International said on March 10 it would “discontinue development of the Prince Rupert LNG project, located on Ridley Island at the Port of Prince Rupert in British Columbia.” It said the Prince Rupert office will remain open through May 2017.

LNG Canada is a joint venture company with PetroChina on 20%, South Korean state Kogas on 15% and Japan’s Mitsubishi Corp on 15%. In late 2016, the joint venture announced an unspecified delay in its scheduled final investment decision. Then March 6 it began re-tendering the project's engineering, procurement and construction (EPC) contract that in 2014 was awarded to Chiyoda, Foster Wheeler, Saipem and WorleyParsons. Four consortia now invited to bid, including most original ones but now in new consortia. LNG Canada said its project had to become "cost-competitive."

Originally, BG listed Prince Rupert among four new liquefaction projects that it was looking to develop later this or early next decade; they also included Tanzania, Australia’s QCLNG train 3, and redevelopment of the Lake Charles LNG import terminal into an export project.

Tanzania remains an ongoing project but with no definite FID or first gas targets that many expect to produce by the mid-2020s. The other two projects (QCLNG-3 and Lake Charles) are less certain, despite US regulator Ferc having given approval to a redevelopment by Lake Charles LNG.

Shell's LNG Outlook, issued February 20 2017, forecast that global LNG demand will grow at a rate of 4%-5% per year between 2015 and 2030.

However near-term, most analysts see a glut of LNG supply worldwide, with more than enough US Gulf coast LNG export projects sanctioned for the medium-term and looking much more competitive, even for Asian markets, than those on Canada's Pacific coast where the Rockies stand between the gas reserves and the sea. There are also challenges over land use from indigenous peoples. 

Mark Smedley