A C$40 billion ($30 billion) liquefied natural gas export project in British Columbia led by Royal Dutch Shell (40% share) is on track to start exporting LNG to Asia as early as 2024, having received a significant financial boost from Canada’s federal government.
Ottawa will provide C$275 million ($207.57 million) in subsidies to help finance the LNG Canada export project, whose partners include Malaysian state-owned oil company Petronas (a 25% share in the project), Japan’s Mitsubishi (15%), China’s PetroChina (15%), and South Korea’s Kogas (5%).
Trying to reduce dependence on exports to U.S.
The federal government’s move to support LNG exports to Asia comes as Canada tries to reduce its dependence on sales to the U.S., Kallanish Energy reports.
Canada is the world’s fourth-biggest natural gas producer and exports half its output to its southern neighbor via pipeline.
The subsidies, announced in late June, are expected to be used to buy gas turbines, which will power natural gas liquefaction plants, and to repair an aging highway bridge.
Two gas liquefaction plants
LNG Canada finalized its investment plan last October. The plan calls for construction of two gas liquefaction plants, with an annual capacity of 7 million tons each, in Kitimat, British Columbia.
“The government of Canada is proud to support this historic C$40 billion project that will get our resources to new markets, diversify our trade, grow our economy and create middle-class jobs for Canadians,” said finance minister Bill Morneau.
A 404-mile pipeline
The LNG Canada project will bring natural gas produced in northeastern British Columbia to liquefaction plants in Kitimat via a 650-kilometer (404-mile) pipeline.
The five partners in the project will receive LNG proportional to their ownership stakes. Exports to Asia will begin as early as 2024.
Canadian natural gas exports to the U.S. sank 6% by volume in 2018 from a year earlier, and they are likely to decline faster in the future. This has forced Canada to look for new export markets in Asia and elsewhere, where demand is growing.
Japan, China, India look ‘promising’
Amarjeet Sohi, Canada’s minister for natural resources, told Japan’s Nikkei Asian Review in an interview Japan, China and India were promising export destinations.
With tensions rising in the Middle East, Japan hopes to reduce its heavy dependence on the region for its energy needs. Several oil tankers, including one Japanese vessel, have been attacked near the Strait of Hormuz recently. Canada will be a good energy supplier to Japan, as it is “very stable,” Sohi said.
Major Japanese energy companies are also moving to expand their LNG procurement from Canada. Tokyo-based JERA has a long-term agreement with an LNG trading unit of Mitsubishi to buy up to roughly 1.2 million tons of LNG a year from the LNG Canada project, Nikkei reported. JERA is a 50-50 joint venture between Tokyo Electric Power Company Holdings and Chubu Electric Power.
Green Party protests
Tokyo Gas also has a long-term agreement with the same LNG trading arm of Mitsubishi, Singapore-based Diamond Gas International, to procure about 600,000 tons a year from LNG Canada.
The project has come under fire from Canada’s Green Party, which accuses the government of subsidizing the fossil fuel industry. Environmental issues are likely to feature heavily in parliamentary elections slated for October.
“LNG Canada’s facility will help bring a cleaner Canadian energy source to replace coal in some of the world’s fastest-growing economies,” said Navdeep Bains, the country’s minister for Innovation, Science and Economic Development.
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