Royal Dutch Shell approved the $31 billion investment of its affiliate Shell Canada Energy on LNG Canada, a major liquefied natural gas project located in British Columbia.
The billions-of-dollars investment will open the fastest route of North American gas export to the Asian market. The route from British Columbia to North Asia is 50 percent shorter than the route from U.S. Gulf of Mexico since and avoids the Panama Canal. In comparison, the LNG Canada will be able to ship gas from British Columbian to Tokyo in eight days while shipment takes 20 days from the U.S. Gulf.
LNG Canada is a joint venture with Petronas, PetroChina, Diamond LNG Canada, Korea Gas Corporation.
Ben van Beurden, the chief executive officer for Royal Dutch Shell, said the investment came at a time where the world market is shifting towards a lower carbon energy system but there is a shortage in LNG supply. With the project, Shell will be able to address this supply shortage while bringing in an internal rate of return of about 13 percent to the company and a sustainable cash flow in the long-term.
The global demand for LNG is expected to double by 2035, Royal Dutch Shell predicts.
The demand for LNG will soar to about 30 percent by 2023 or about 450 tons a year, Reuters reported separately, citing estimates from the International Energy Agency and Wood Mackenzie respectively.
The construction for the LNG Canada project will start immediately, Royal Dutch Shell said. The goal is to have LNG Canada start supplying customers with gas before 2025.
The expected surge in demand for LNG is attributed to the equally growing requirement for cleaner fuel replacement from nations that are aiming to reduce pollution and carbon emissions. Among Asian nations with massive LNG, the market potential is China, India, Pakistan, and Bangladesh.
Meanwhile, Bloomberg highlighted that Canada will definitely reap the benefits of the project as it opens a wider market compared to its almost exclusive gas distribution to the United States. At present, Ottawa is supplying Washington via a pipeline while LNG Canada investment involved two LNG trains with a combined capacity of 14 million tons per year.
The competition for the Asian market, however, is also expected to increase two-fold as the United States has already approved similar projects that would be operational by the end of 2021.
Among these projects is the Tellurian Driftwood project which promises a delivery of 27.6 million tons a year and the Novatek's Arctic LNG-2 project with a promise of 19.8 million tons.
There are also two LNG projects in Africa being headed by Exxon Mobil and Anadarko Petroleum.
