Recent moves by Petronas and Shell to reshuffle ownership stakes are ways to share the project risk and move toward a final investment decision.
Pacific NorthWest LNG (owned by Petronas) is planning to build a world-scale LNG export facility on Canada’s West Coast at Lelu Island near Prince Rupert, British Columbia. The proposed facility will comprise an initial development of two LNG trains of approximately 6 million tonnes per annum (MTPA) each and a subsequent development of a third train of approximately 6 MTPA. Pacific LNG is expected to annonce its final investment decision this year on the project.
Progress Energy Canada Ltd. (Progress Energy), Pacific NorthWest LNG Ltd. (PNW LNG) and Petroliam Nasional Berhad (PETRONAS) have signed transaction agreements whereby China Petrochemical Corporation (SINOPEC), through its affiliates, will acquire a 15 percent interest in Progress Energy’s LNG-destined natural gas reserves in northeast British Columbia and in the proposed PNW LNG export facility planned for Prince Rupert, BC. As part of the transaction, SINOPEC has agreed to offtake 1.8 million tonnes of LNG per annum (MTPA), which represents a pro-rata 15 percent of the LNG facility’s production, for a minimum period of 20 years.
In addition to the transaction, SINOPEC agreed to purchase from PETRONAS 3 MTPA of LNG for 20 years sourced primarily from the Pacific Northwest LNG project. The two previously announced transactions in 2013 that saw JAPEX Montney Ltd. acquire a 10 percent interest, PetroleumBRUNEI acquire a 3 percent interest in the project and the recent announcement on the acquisition of a 10 percent interest by Indian Oil Corporation Ltd. Following the closing of the Indian Oil Corporation Ltd. and SINOPEC acquisitions, PETRONAS will hold 62 percent of the integrated project and will continue to work with potential customers and partners to secure markets for LNG.
Meanwhile Shell Canada Ltd. announced that it has increased its stake in the LNG Canada Project to 50%, with Petro-China taking 20%, Mitsubishi Corp. and Kogas taking 15% each. The owners will take deliver of the LNG shipments based on their share of the ownership, ie. outtake deliveries.
The LNG Canada project is terminated in Kitimat BC and will be constructed in phases, with Phase 1 having a design capacity of approximately 12 million tonnes per annum (mtpa) and Phase 2 having an additional 12 mtpa. The final investment decision is expected in 2015.
The recent moves to adjust the ownership mix is a sign the proponents are getting closer to announcing a final investment decision. The two final and critical pieces to work out are the pricing of the LNG and the royalty/taxation regime that will apply.
These are very large projects $10-15B each that will have a massive impact on the economy of north-eastern BC. Once construction is underway, skilled trades shortages will ripple through the economy and housing in Prince Pupert and Kitimat will become much more expensive. Incomes will increase throughout the region.