Return of the mega-project: Shell approves $31 billion LNG venture in Canada

Royal Dutch Shell and its partners have reached an investment agreement for a US$31 billion LNG mega-project in Western Canada, which has been forecasted to stimulate a fresh wave of investments in major gas projects globally.

LNG Canada – the consortium behind the project, comprised of Shell Malaysia’s Petroliam Nasional Bhd, Mitsubishi Corp., PetroChina Co. and Korea Gas Corp, confirmed the expected final investment decision (FID) on Tuesday.

Construction of two 14 million tonnes a year capacity LNG trains will start immediately, with first shipments of the super-chilled fuel expected before 2025, when it will feed growing demand for gas across Asian markets, primarily China.

The investment case rests on the assumption that China will replace much of its coal-fired energy with natural gas in and attempt to reduce pollution and carbon emissions. Shell believes LNG demand will roughly double by 2035.

The green light is the first such approval of a major LNG project in three years and should mark the end of the recent downturn in the natural gas market. The outlook for LNG has improved since analyst research warned the market could soon be in deficit unless new projects are built.

The project, located in British Columbia, is the largest private sector investment project in Canadian history and comes as a welcome boost to the country’s investment climate after the recent exodus of global energy firms from Alberta’s oil sands and the botched expansion of the Trans Mountain oil pipeline.