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Asian Nations Join Shell on Canada LNG Project

May 16, 2012


TOKYO—Energy companies from China, South Korea and Japan have put aside political and commercial rivalries to ship billions of dollars worth of Canadian liquefied natural gas to Asian markets, but they will face stiff competition for supplies and customers from a raft of competing projects.

In a landmark agreement, Mitsubishi Corp., 8058.TO -0.49% Korea Gas Corp. and PetroChina Co. 0857.HK -3.80% late Wednesday said they and Royal Dutch Shell RDSA +0.66% PLC would go ahead with a “LNG Canada” project to pipe gas to the Pacific Coast, where it will be deep-chilled and exported by sea.

The news comes at a time of rapidly rising Australian LNG output, with much of that directed at the same Asian markets, a likely outflow of large volumes of Canadian and U.S. LNG due in part to the shale gas boom, the planned exploitation of huge gas reserves in countries such as Mozambique and expansion projects by top exporter Qatar.

The decision follows the Canadian government’s approval of two smaller LNG export projects at Kitimat, British Columbia, designed to diversify Canada’s energy sales away from the U.S. and towards to Asia.

One is an Apache APA +2.59% Corp.-led venture for up to 10 million metric tons a year of gas, and the other is the BC LNG Export Co-operative, which plans to ship out 2.4 billion cubic meters annually.

The Asia-Shell project is for a two-train, 12 million tons a year export terminal at Kitimat, with a final investment decision slated for 2015 and exports by 2019, potentially rising to 24 million tons later.

Shell has a 40% stake and the three Asian companies 20% each, or the equivalent of 2.4 million tons a year each in the first phase. Cost estimates haven’t been given.

The project is subject to Canadian government review, PetroChina spokesman Mao Zefeng said Thursday.

A Mitsubishi spokesman said the partners aren’t worried about feedstock competition because “there are plenty of gas resources in the Western and mid-Western part of Canada.” Customers will mainly be in Asia, including Japan, but allocations, buyers and pricing system haven’t yet been decided, he said.

Japan and South Korea are the world’s top two LNG importers, and China was seventh ranked according to 2010 data. Import volumes from Japan and China are climbing rapidly.

Japan’s LNG imports rose 18% on year to 83 million tons in the year ended in March 2012, as utilities boosted thermal power station rates following the Fukushima Daiichi disaster and the closure of Japan’s nuclear reactor fleet.

For its part, China’s LNG imports jumped 31% last year, and further big rises are expected as a string on receiving terminals are under construction and the government wants natural gas to take a mach larger share on the national energy mix.

Write to Mari Iwata at [email protected]


RELATED: Resource-Rich Canada Looks to China for Growth


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