LNG

LNG Canada, the Shell-led project in the Pacific Coast province of British Columbia, may decide to double the current capacity from 14 million tonnes per annum to 28 MTPA if the five shareholders agree to proceed before the first cargo is shipped by around the end of 2024.

That’s the view of LNG Canada Chief Executive Jason Klein who is overseeing the construction of the plant near Kitimat which along with the Coastal GasLink pipeline bringing feed-gas from northeast BC will be 70 percent complete or even slightly more by year-end.

The largest private investment in Canadian history and with an export licence for 40 years it is ideally placed to satisfy the LNG cargoes needs of the growing Asia-Pacific market.

CEO Klein said in an interview with Canada’s “Financial Post” that he regularly hears the word “completion” of first phase followed by the word “expansion” in his calls with the project partners who are all Asia-based.

“There is more urgency, but we are already doing everything we can to build it as quickly as possible,” said Klein.

As European and Asian countries compete to secure gas shipments for delivery this winter amid the worst energy crisis in decades, Klein stated that Canada’s first LNG export project was progressing well.

The main engineers on the project are Fluor Corp. of the US and JC Corp. of Japan.

Investments

Among the shareholders, Shell owns 40 percent, Petronas of Malaysia has 25 percent, PetroChina holds 15 percent as does Mitsubishi Corp of Japan through its Diamond LNG subsidiary, while Korea Gas Corp. owns the remaining 5 percent. 

The five shareholders had agreed in October 2018 to invest C$40 billion (US$30.2Bln at the time) on the brownfield site that had been an energy products terminal before being acquired by Shell in 2011.

The work on the initial two mega-Trains each with capacity of 7 MTPA has suffered hold-ups because of Covid-19 amid a dispute over schedules with the pipeline company TC Energy, so the final cost of the overall project could be much higher.

“When we start up, that’s over 14 million tonnes of supply on phase one that’s going to go into the market,” said Klein in his interview.

“It’s probably going to land in Asia in the first instance, just because of the shipping synergies,” he added.

Asia centred

“I’m a firm believer that every cargo we put into Asia, frees up a cargo somewhere else to go to Europe. So I do think Western Canada has a role to play in this,” explained Klein.

He noted that the LNG Canada project was originally conceived as a potential supplier for premium Asian markets.

However, in the seven months since the start of the war in Ukraine energy prices have skyrocketed and gas exporters, particularly along the US Gulf Coast, have pivoted to Europe.

Klein acknowledged that one potential solution under discussion to curtail LNG Canada’s greenhouse-gas emissions in the second phase would involve complete electrification of the liquefaction process.

Currently, in the project’s first phase, the plant’s huge compressors are powered by natural gas.

FID considerations

“I think the case remains compelling. It is very strong. And we’re looking forward to a phase two positive (final investment decision) with our partners,” stated Klein.

“It comes down to five decisions in five boardrooms around the world,” he concluded.

He said the project was advancing quickly with its workforce expected to peak in 2023 at around 7,500 employees

CEO Klein was nominated to his position by Shell in April 2022, having begun his career with the major in 2016, following its acquisition of BG Group where Klein worked in the Middle East, Europe, North America and Australia in roles spanning the legal function, upstream operations and LNG developments.

Following the BG takeover, Klein became Vice President of US LNG within Shell’s Integrated Gas business, responsible for leading its development of the Elba Island LNG plant now operational near Savannah in the US state of Georgia.

He has a Bachelor of Science from Trinity University in San Antonio in Texas and a Doctorate in Jurisprudence from the University of Texas School of Law.

The South Koreans have swooped to become the fourth customer signed up in foru weeks for Energy Transfer LP’s liquefied natural gas volumes from the Lake Charles LNG terminal on the US Gulf Coast being transformed into a liquefaction and export plant.

Energy Transfer LP, the owner of pipeline and other assets in the Permian Basin and Haynesville Shale as well as the Cushing crude oil delivery system, has signed an LNG sale and purchase agreement (SPA) with global commodities firm Gunvor and its third in the past two months for its Lake Charles LNG export project in Louisiana.

Trinidad and Tobago, the Caribbean nation shipping cargoes from the Atlantic LNG facility at Point Fortin in Trinidad, will have access to more feed gas after Royal Dutch Shell started production at a new gas field.

Shell said natural gas was now flowing from “Project Barracuda”, otherwise known as Block 5C in the East Coast Marine Area (ECMA) of Trinidad and Tobago.

“This marks a significant milestone in the delivery of gas both domestically and internationally through Atlantic LNG,” stated the Anglo-Dutch company.

Project Barracuda is a backfill venture amounting to around 25,000 barrels of oil equivalent per day, or 140 million standard cubic feet per day of gas, of sustained near-term output with peak production expected to be about 40,000 boe per day, or 220 mmscf per day.

“It is Shell’s first greenfield project in the country and one of its largest in Trinidad and Tobago since the BG Group (2017) acquisition,” stated Shell.

The new feed-gas resources are a boost for the plant in Trinidad that saw exports drop in 2020 by 19.3 percent to 10.08 million tonnes.

Before the shale-gas boom in North America, Trinidad was the main LNG supplier to import terminals in the US, now the world's third-largest LNG exporter.

Shell is a major shareholder in Atlantic LNG with equity shares in the four liquefaction Trains at the Point Fortin facility ranging between 46.0 percent to 57.5 percent.

Maarten Wetselaar, Director of Integrated Gas, Renewable and Energy Solutions at Shell, said that Project Barracuda strengthened the “resilience and competitiveness” of Shell’s position in Trinidad and Tobago.

“This is a key growth opportunity that supports our long-term strategy in the country as well as our global LNG growth ambitions,” stated Wetselaar.

Eugene Okpere, Shell’s Senior VP and Country Chair, said he was delighted with the start of production.

“We are immensely proud of our people and the remarkable work it took to achieve this milestone, particularly given that drilling began in May 2020 during the Covid-19 pandemic,” explained Okpere.

“Our execution strategy had to be completely overhauled to deliver our business plan, all while working remotely. It required tremendous resilience, adaptability and commitment,” he said.

Shell noted that ECMA is one of the most prolific gas-producing areas in Trinidad and Tobago.

As part of Shell’s development strategy in the region, the company had sought ways to access the significant volumes that exist there and bring them on stream.

The Barracuda Project comprises two subsea wells, both 100 percent owned by Shell, one in the Endeavour field and the other in the Bounty field.

Both wells are tied back to Shell’s Dolphin platform.

“These are two of the deepest development wells in Trinidad and Tobago,” said Shell.

“Endeavour was drilled to a depth of 20,000 feet (6,096 metres) while Bounty was drilled to a depth of 16,000 feet (4,877 metres),” it explained.

Shell said it now looked forward to the delivery of the four-well development project in Block 22 and NCMA 4, known as the Colibri Project.

This is a joint venture with Heritage Petroleum Co., the emerging Trinidad and Tobago oil and gas company, with first gas from Colibri expected in 2022.