Canadian LNG projects have four to six years to begin construction or they will lose out to global competitors, said Shell Chief Executive Officer Peter Voser. “If Canada wants to compete against those projects then you have a certain time window,” Voser said in Calgary last month. “It needs to get done this decade.” He said Shell already controls almost a third of the global market for LNG, which is produced by cooling gas to reduce its volume and make it easier to transport by ship. There may be room for two or three LNG projects in western Canada, given Japan’s changing views on nuclear power and volatile oil prices, said Fadel Gheit, an oil and gas analyst at Oppenheimer & Co. in New York. Shell has “much deeper pockets” than some competitors and is “willing to spend billions of dollars on LNG,” he said. Emily Oberton, a Houston-based Shell spokeswoman, declined to estimate how much its Canadian project will cost to build. Start up is anticipated near the end of the decade, depending on regulatory approvals and its partners’ final investment decisions, she said yesterday in an e-mail.
Regulators already have granted licenses for two Canadian projects: the Apache-led Kitimat LNG, a $15 billion venture with Encana Corp. and EOG Resources Inc.; and BC LNG, Haisla’s venture with closely held Houston-based LNG Partners LLC. BG’s planning for a potential LNG project is in the “early stages,” David Byford, a Houston-based company spokesman, said yesterday in a telephone interview. A spokesman for Haisla wasn’t immediately available to comment. The difficulty for the Canadian projects is finding Asian buyers willing to sign long-term contracts and then wait years for the multibillion-dollar infrastructure to get built, said Mary Barcella, a director of North American natural gas at IHS Inc., which provides business advice and analysis to energy companies.
“The early movers will definitely have an advantage,” Barcella said in a phone interview last week. “As you build up capacity, you start to get prices softening.” To entice buyers, Encana said it and its partners are considering selling a stake of as much as 20 percent of their Kitimat project. Apache currently has a 40 percent stake, while Calgary-based Encana and Houston-based EOG each have 30 percent. John Roper, an Apache spokesman, declined to comment on possible stake sales or contracts, and said it’s too soon to say how the company will proceed with its Canadian project. “We’ll make a decision when we have all our i’s dotted and t’s crossed,” Roper said yesterday in a telephone interview. Apache and its partners have said they want Asian buyers to pay oil-linked prices, which averaged $16.66 per million British thermal units of gas in the first quarter. Gas futures in New York, which touched a 10-year low of $1.902 per million Btu in April, averaged $2.50 per million Btu in the first quarter and settled at $2.218 yesterday. “Pricing is the real challenge signing into these 20-year contracts,” Greg Stringham, a vice president for CAPP, the Canadian producers organization, said in a telephone interview. Shell’s project has a “big” advantage over Apache’s because its partners are also LNG buyers, Brian Youngberg, a St. Louis-based analyst at Edward Jones, said yesterday in an e- mailed response to questions. Youngberg said Shell also has an edge because of its “history of being the global leader in LNG.”