Royal Dutch Shell Plc  .com Rotating Header Image

Shell Canada to go ahead with Kitimat LNG projects despite billion-dollar Chinese gas investment

By Gordon Hamilton, Vancouver Sun: August 21, 2012

Royal Dutch Shell’s decision to invest $1 billion a year in shale gas exploration in China has not changed Shell Canada’s plans to build a liquefied natural gas terminal at Kitimat aimed at the Chinese market.

Despite China’s potential for shale gas production, demand there is expected to outstrip supply, Shell Canada said Tuesday in a statement.

“The exploration and development of shale gas is expected to grow in China and Shell’s investments, largely with PetroChina, are reflective of that growth,” Shell Canada spokesman Stephen Doolan said. “However, the demand for energy in China and throughout Asia is expected to exceed domestic production.

“This demand for energy, coupled with the wider demand for LNG in Asia which is likely to grow by more than 80 million tonnes per annum between now and 2020, underscores Shell’s intent to continue to progress the LNG Canada project.”

China is estimated to hold the world’s largest reserves of shale gas, which can be extracted by using hydraulic fracturing, a technology already in use in North America. “Fracking” has unlocked huge gas reservoirs in North America, resulting in the price of natural gas here dropping to less than a fifth of the price in Asia.

The low Canadian price for gas has spurred interest in B.C. for LNG terminals to ship gas from the Peace River region to Asia.

Apache Canada, which is also developing plans for an LNG terminal at Kitimat, said Tuesday that the decision by Shell to invest heavily in Chinese shale gas has no impact on its proposed $4.5-billion terminal and pipeline.

“We are going to proceed with our plans,” said Andree Morier, communications adviser at Apache Canada, the lead company in the Kitimat LNG project. Its partners in the project are Encana Corp. and EOG Resources.

Kitimat LNG is the most advanced of several proposed LNG terminals at Kitimat. It is conducting site preparation work, has an export licence to ship five million tonnes of LNG a year and is working toward a final investment decision on the pipeline-and-terminal project.

Morier said that the Kitimat LNG project and Shell’s decision to invest in China are “mutually exclusive.” It also has had no impact on KLNG’s efforts to sign long-term LNG contracts in China, she said.

“We are continuing ongoing discussions with several Asia-Pacific companies,” she said.

Shell Canada has also purchased land at Kitimat and has selected Trans Canada to develop and build a pipeline across B.C. to deliver gas to its proposed Kitimat plant.

Shell has already announced plans for a terminal that would be twice the size of the KLNG project. B.C. Energy Minister Rich Coleman has previously described Shell’s LNG proposal for Kitimat as in the $12-billion range, making it one of the largest, if not the largest, investments ever in B.C.

The provincial energy ministry said Tuesday that it considers LNG to be a competitive, expanding global industry and the demand versus supply conditions worldwide support accelerated LNG growth in this province.

Royal Dutch Shell’s partner in China is China National Petroleum Corp., the parent company of PetroChina, which is one of Shell Canada’s partners in its LNG Canada project.

Shell and CNPC are also partners in other global gas projects, including Australia.

Along with the $1-billion exploration budget, Shell also has plans to build a $12.6-billion refinery and petrochemical complex in Eastern China, which would be the largest foreign investment in that country as well.

David Black, the B.C. businessman who has proposed building a $13-billion oil refinery at Kitimat, said last week when he announced his plan that the LNG projects proposed for Kitimat might not proceed because of China’s recently discovered shale gas reserves.

“All those LNG plants are just an idea. They are waiting for their contracts,” he said “And those contracts are not coming right now, unfortunately.

“China is just starting to drill their shale areas to see whether they have got gas there, so they are not about to lock in to buy our LNG for long periods of time until they find out how much gas they’ve got at home. And that’s going to hold up all of that, I think, quite a bit.”

But a recent article on the National Geographic Daily News website noted that China faces challenges in developing its unconventional gas resources, mainly shortages of water needed for fracking, more extreme geology, and a lack of pipeline infrastructure.

[email protected]

© Copyright (c) The Vancouver Sun and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

0 Comments on “Shell Canada to go ahead with Kitimat LNG projects despite billion-dollar Chinese gas investment”

Leave a Comment

%d bloggers like this: