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Shell-led group again defers Canadian LNG project amid global price slump

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Shell-led group again defers Canadian LNG project amid global price slump

A consortium led by RoyalDutch Shell plc will not give the green light to a Canadian LNGproject by a pushed-back year-end deadline, citing capital constraints andslumping prices for the fuel.

LNG Canada,carrying cost estimates of C$23 billion to C$36 billion, had been expected toannounce a final investment decision by the end of 2016. The company inFebruary said it would not meet a previous mid-year for the decision, known as FID.LNG Canada CEO Andy Calitz said in a July 11 statement that the project remainsa "promising opportunity" and the partners are looking at a range ofoptions to make it a reality.

"In the context of global industry challenges,including capital constraints, the LNG Canada joint venture participants havedetermined they need more time prior to taking a final investment decision,"the company said in the statement. "At this time, we cannot confirm whenthis decision will be made."

LNG Canada is a victim of a commodity price slump that hascaused large oil companies to slash spending and reassess projects in progress.Of roughly 20 LNG projects proposed for the northern coast of British Columbia,only the Petroliam Nasional Bhd.-ledPacific NorthWest LNGproject has reached a tentative FID. The project awaits final from Canada's federalgovernment and faces opposition from First Nations and environmental groups.

A joint venture owned 50% by Shell Canada Energy, 20% by anaffiliate of PetroChina,and 15% each by affiliates of Japan's Mitsubishi Corp. and South Korea's , LNG Canadawould initially comprise two trains, each capable of producing 6.5 milliontonnes of LNG per year, with an option to add two trains in the future. InDecember 2015, the Kitimat, British Columbia, project became the first proposedLNG export project in British Columbia to receive a facility permitfrom the provincial Oil and Gas Commission. In January, Canada's NationalEnergy Board authorizedit to export up to 3.7 Bcf/d of natural gas for 40 years.

The company will continue with site preparation work andwill now consult with its partners and First Nations "to define a revisedpath forward to FID," the statement said.