SHELL & CANADA LNG: $35 BLN

A liquefied natural gas export plant proposed for Canada's Pacific coast and backed by Royal Dutch Shell PLC could cost up to 40 billion Canadian dollars ($35.3 billion), according to a regulatory filing with the British Columbia government.

The project, dubbed LNG Canada, is one of 18 multibillion-dollar terminals proposed for shipping LNG from the West coast province to global markets, particularly in Asia. None of the plants have been built yet amid concerns about construction and operational costs.

"We haven't made a final investment decision, but we are still plugging ahead," LNG Canada spokeswoman Susannah Pierce told reporters Friday.

LNG Canada is the third project to apply for an environmental assessment certificate in British Columbia following rival plants led by Malaysian state-owned energy company Petroliam Nasional Bhd., or Petronas, which submitted its application in February, and Chevron Corp., which took over a project that already received its certificate. Canada has looked to LNG exports as an outlet for surplus natural gas resulting from a boom in production in both Canada and the U.S.

LNG Canada is also one of 10 natural gas export projects that Shell has under way globally and must compete for capital with those and other investments at a time when prices for oil and natural gas have slumped, crimping profit growth in the energy industry.

Shell's Canadian unit owns half of the Canadian project in partnership with affiliates of Chinese state-owned energy company PetroChina Co., which owns another 20%, along with 15% stakes each for Korea Gas Corp. and Japan's Mitsubishi Corp.

Shell has said it would make a decision by mid-decade on the proposed Canadian plant. Construction would take five years and employ as many as 7,500 workers, it said.

Its move to push ahead with the regulatory filing comes just over a week after BG Group PLC pushed back its timeline for developing its own LNG plant in British Columbia, citing concerns about pricing uncertainty in the global gas market and a possible glut in supply.

The LNG Canada cost and workforce estimates were disclosed in a filing for an environmental assessment certificate, a key regulatory requirement, which is under a 180-day review by the government of British Columbia on behalf of itself and the federal government in Canada.

The construction cost could be anywhere from about C$25 billion to C$40 billion, LNG Canada said. That doesn't include a C$4 billion pipeline to be built by TransCanada Corp. that would carry shale gas 400 miles from inland British Columbia, or the spending needed to develop those upstream gas fields.

Petronas has said its LNG project in British Columbia could cost upward of C$36 billion.

LNG Canada's proposal includes a plan to ship a LNG byproduct called condensate inland via a Canadian National Railway Co. railroad. Condensate, an ultralight form of oil, is used by many oil sands producers in neighboring Alberta province, which need it for diluting heavy oil for shipment via pipe or rail.

wsj.com