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Shell mulls investment in new wave of LNG projects

Shell chief executive Ben van Beurden says the company is looking to finalize new investments, which may include the company’s LNG Canada project

HOUSTON – The head of Royal Dutch Shell Plc dropped a hint that it’s keen to invest in liquefied natural gas projects soon on Tuesday, a tantalizing prospect for Canadian gas producers desperate to access rapidly changing global energy markets.

Shell chief executive Ben van Beurden did not specifically mention the company’s LNG Canada project in Kitimat, British Columbia when he addressed a room of oil and gas executives on Wednesday, but indicated the company is looking to finalize new investments.

“This is not a bad time to start thinking about investing again,” van Beurden said. The company has previously said LNG Canada is “investible” and some analysts believe the project is most likely Canadian project to proceed.

Van Burden reiterated Shell’s previously stated view that global LNG markets are on pace to be undersupplied by 2020 even as North American gas production – both in Canada and the U.S. – has ramped up dramatically.

While American producers are celebrating their prospects at CERA Week, an important energy conference in Houston organized by research firm IHS Markit, Canadian companies have had difficulty accessing global markets.

Given changing expectations between LNG buyers and sellers, those difficulties are likely to increase without an LNG project in Canada, given the outlook for a surge in U.S. natural gas supply.

Shell, the world’s largest LNG supplier following a US$50-billion merger with BG Group in 2016, published a global LNG outlook in February that forecast a 275 million tonne supply shortage over the next few years.

The company’s LNG Canada project could reduce that shortage by nearly 10 per cent, exporting as much as 26 million tonnes per year.

Japan-based JERA Co., the world’s largest LNG importer, has preliminary agreements in place to purchase LNG from another Canadian project, Pembina Pipeline Corp.’s Jordan Cove LNG project in Oregon.

Asked whether or not he was in talks to purchase LNG from Shell’s Kitimat project, JERA chairman Hendrik Gordenker would only say the company is in talks all around to world on sourcing LNG.

“We’re a pretty big LNG buyer, we look at all the possibilities in the world, we look for the best ones we can find,” Gordenker said. He declined to comment on Kitimat projects specifically.

Shell has said it will make a final investment decision on the project this year. Similarly, Pembina has indicated it will make a decision on building its Jordan Cove project — which will source supply from U.S. Rockies and British Columbia — by the end of the year.

Canadian natural gas producers are increasingly desperate to see an LNG project built as pipeline bottlenecks, and contracting and maintenance issues have driven the price of gas in Alberta into negative territory at different times in late 2017.

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