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‘Shell close agreement for mega-investment in Canada’

Printed below is an English translation of an article published today by the Dutch Financial Times, Financieele Dagblad


‘Shell close agreement for mega-investment in Canada’

Bert van Dijk • Entrepreneurship

Is it going through or not? That question keeps Canada busy these days. Is Shell about to give the final green light for one of the largest investments this year in the fossil energy sector: the construction of an immense factory to produce liquid gas (LNG)? Cost: $ 30 billion. Shell works together with three partners in the project: Petrochina, Korea Gas and Mitsubishi.

Everything indicates that Shell is steering towards a positive decision. The Bloomberg news agency reports that it is currently a coming and going of strangers in Kitimat on the west coast of Canada. In the village where the factory has to be, it has been very quiet in the past two years. Shell issued an investment decision in 2016, due to weak market conditions and low oil prices.

Lights on

‘The lights are on, curtains are opened and SUVs stand in front of the apartment building that was built to house Shell people’, writes the news agency. The residential complex was abandoned for a long time.

At the same time, the rents in the village are on the rise and twice as many houses are being sold as normal. All signs that indicate that the decision has already been taken behind the scenes. “I put my money on the project,” said Mayor Phil Germuth of Kitimat to Bloomberg. He recently received several bankers, as well as a delegation from Mitsubishi.

One of the largest new energy projects

A spokesperson for the group informs the FD that the partners of the joint venture continue to work towards a final investment decision, but that a decision has not yet been taken. LNG Canada, as the project is called, is one of the largest projects in the energy world. LNG stands for Liquid Natural Gas.

Shell expects the global natural gas market to grow significantly in the coming decades, by an average of 2% per year. The demand for lng even with 4%. Although there has been overcapacity in recent years, there will still be a need for greater production in the coming years, the gas multinational expects. ‘Final investment decisions for LNG projects are soon needed to prevent shortages in 2020’, the company wrote in February of this year in a report on the market for LNG.

Shale gas field

An improving gas market in the world, particularly in Asia, must make the project sufficiently profitable. In total, the planned factory is expected to have a capacity of 28 million tons of LNG. That is about 10% of the current worldwide lng production.

For Canada, the project would be a lucrative way to become less dependent on cheap gas exports to the US. Nearly all of Canada’s energy production is now exported to the US in the absence of port facilities. With LNG Canada, the country can sell its shale gas in liquid form on the world market, at better prices.

Support from indigenous people for Shell

The biggest demand for liquefied gas comes from Asia, with Japan as the leader, followed by China and South Korea. Growth in China is a logical consequence of the continued economic growth in the country and the government policy to combat air pollution. Smog is a big problem in Chinese cities and gas is a cleaner alternative to coal.

The local, indigenous population supports the immense project according to Bloomberg. Shell has received extensive support, making it unlikely that the project will encounter local resistance. “If there ever was a blueprint for the way to approach a large industrial project, then LNG Canada is one to learn from,” said Crystal Smith of the indigenous people of Haisla.

The plant also receives the lowest CO₂ emissions per tonne of LNG in the world, according to the local authorities.


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