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Shell boosts LNG Canada stake while Asian partners lower theirs

The Kitimat LNG site on the Douglas Channel.

JOHN LEHMANN/THE GLOBE AND MAIL

Shell Canada Ltd. has raised its stake in the LNG Canada project while saying its Asian partners are committed to taking delivery of B.C. liquefied natural gas, despite two of the co-owners reducing their interests.

Shell now holds 50 per cent of LNG Canada, up from 40 per cent, after the Royal Dutch Shell PLC subsidiary signed a joint venture agreement Wednesday with three Asian partners. PetroChina Co. Ltd. still owns 20 per cent of LNG Canada, but Japan's Mitsubishi Corp. and South Korea's Kogas each decreased their stakes to 15 per cent from 20 per cent.

LNG Canada chief executive officer Andy Calitz, who also represents a unit named Shell Canada Energy, said the joint venture pact is an important milestone because it creates an operating entity to hire potential suppliers and contractors.

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The Asian partners could have walked away to focus on other global ventures, but they chose to support plans to export LNG from Kitimat in northwestern British Columbia, he said during a news conference in Vancouver, where B.C. Premier Christy Clark also announced her Asian trade mission.

TransCanada Corp. has been lined up to build the Coastal GasLink Pipeline Project from northeastern British Columbia to Kitimat.

Mr. Calitz said each of LNG Canada's co-owners will take responsibility for their portion of deliveries, based on their equity stakes. "They each book their own capacity in the pipeline to be built by TransCanada," he said. "For every 100 cargoes that will be produced, 15 will go to Kogas, 15 will go to Mitsubishi, 20 will go to PetroChina and 50 will go to Shell."

Front-end engineering, an environmental assessment and consultations with First Nations will need to be completed before LNG Canada reaches a final investment decision within 18 to 24 months. That means the project could start construction in late 2015 or early 2016, with the first LNG deliveries targeted by the end of 2020. By contrast, the Pacific NorthWest LNG Project led by Malaysia's Petronas is eyeing late 2018 to begin exports, assuming a final investment decision is made by the end of this year.

Ms. Clark will lead the B.C. delegation in Malaysia, Singapore and Hong Kong next week to promote the province's LNG opportunities.

Ideally, B.C. residents will have first dibs on LNG job openings, she said. "Our view is very much British Columbians first, and the way to do that is to make sure that people have all the skills training that they need to take advantage of those jobs," she said. "Second, reach out to the rest of the country. And then third, work with unions and other organizations – when needed – to support temporary foreign workers coming in."

Goh Lin Piao, director of external affairs at Singapore-based RGE Pte Ltd., said his firm is looking forward to strengthening ties with British Columbia. RGE owns the Woodfibre LNG export project planned for Squamish, 65 kilometres north of Vancouver.

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Mr. Goh said RGE will have LNG customers in Shanghai.

Industry observers say LNG projects that effectively arrange Asian customers in advance have a competitive edge in the race to export B.C. natural gas in liquid form in tankers.

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About the Author

Brent Jang is a business reporter in The Globe and Mail’s Vancouver bureau. He joined the Globe in 1995. His former positions include transportation reporter in Toronto, energy correspondent in Calgary and Western columnist for Report on Business. He holds a Bachelor of Commerce degree from the University of Alberta, where he served as Editor-in-Chief of The Gateway student newspaper. Mr. More

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