With a world-wide slump in oil and natural gas prices extending further than expected, the Shell-led liquefied natural gas project proposed for Kitimat has delayed its final investment decision until the end of the year.
Backed by a consortium of Shell Canada, Korea Gas, Mitsubishi and PetroChina, the LNG Canada project is a key part of the B.C. government's bid to enter the global LNG export market. Along with delays on the Petronas-led Pacific Northwest LNG proposed for Prince Rupert, the chances of a large LNG project being under construction by the 2017 provincial election have faded.
Premier Christy Clark was attending an industrial development conference in Ottawa when the delay was revealed in Shell's quarterly update. As with other global energy companies, the glut of oil resulted in a 44 per cent in earnings for Shell compared to the same quarter last year.
Clark, who rode the prospect of an LNG revenue bonanza to victory in the 2013 B.C. election, acknowledged that the delay is significant.
"What I was pleased to see, though, is that Shell has reconfirmed its intention to make a final investment decision this year, even in these very uncertain times," Clark said.
LNG Canada CEO Andy Calitz was attending the same conference and he noted that the delay means all four international partners have agreed to stay with the project.
"LNG Canada is in great shape as a project," Calitz said. "We have all our federal and provincial environmental approvals in place, and the National Energy Board recently decided that they support a 40-year export licence."
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Another factor in the delay is the ongoing Shell takeover of British Gas Group, which had its own proposal to build a pipeline and LNG terminal in the Prince Rupert area.
LNG Canada has an agreement with TransCanada Corp. to build a pipeline through the Rocky Mountains from northeastern B.C., where Shell and others have major gas drilling operations in the Montney shale near Dawson Creek and other gas-rich formations.
Pacific Northwest LNG is still waiting for its federal environmental permit, after redesigning its LNG tanker port proposed for Lelu Island near the Prince Rupert port. Local protests have dogged the project over its potential impact on salmon in the Skeena River.
