(EnergyAsia, May 16 2012, Wednesday) — Royal Dutch Shell said it is leading a consortium comprising subsidiary Shell Canada Ltd, Korea Gas Corporation (Kogas), Mitsubishi Corporation, and PetroChina Company Limited to develop a giant liquefied natural gas (LNG) export terminal in western Canada.

The 12-million-tonne/year project to be sited near Kitimat, a town on the British Columbia coastline, will enable Canada to develop and export its abundant reserves of cleaner-burning natural gas to Asia’s energy-deficit fast-growing economies.

Shell Canada will hold a 40% interest in LNG Canada with Kogas, Mitsubishi and PetroChina each holding a 20% interest.

Expected to cost at least US$12 billion, the project includes the design, construction and operation of a gas liquefaction plant and facilities for the storage and export of LNG including marine off-loading facilities and shipping.

LNG Canada will initially have two processing units, or trains, each with the capacity to produce six million tonnes of LNG annually.

Shell said the project brings together partners with a unique combination of strengths: innovation, financial muscle, development expertise and access to important markets, namely China, Japan and South Korea, three of Asia’s four giant economies.

Shell said the partners will decide whether to move ahead with the project’s development after conducting engineering work and environmental assessments, as well as consultations with local communities and other stakeholders. Start-up could come around the end of the decade assuming all necessary regulatory approvals and investment decisions.

Shell’s announcement today will further heat up the race among various groups to develop export-oriented LNG terminals in Western Canada in particular, and North America in general. One of the early movers, the Apache Corp-led Kitimat LNG, which already has an export permit, is hoping to start construction of its five-million tonne/year terminal later this year.

Investors are looking to profit from the unprecedented price gap between North American and Asian natural gas markets, particularly after Japan shut down all its nuclear power plants following the earthquake-tsunami tragedy of March 2011. While North American gas prices have hovered around US$2 to US$2.50 per million BTU, Asian buyers are paying between US$16 and US$18.

Shell Canada Ltd is a global leader in the LNG business, providing the technology for the world’s first commercial liquefaction plant in 1964.
Royal Dutch Shell currently has seven LNG projects in operation in seven countries, with three new projects under construction, and operates one of the largest LNG fleets in the world.

Kogas, the world’s largest LNG importer and South Korea’s sole LNG provider, operates three terminals and a nationwide pipeline network to supply natural gas to power generation plants, gas-utility companies and city gas companies. The company has also diversified into LNG swapping and trading, and LNG terminal construction, operations and management.

Mitsubishi Corporation, Japan’s largest trading company, handles half the country’s LNG imports. Since pioneering the first LNG import to Japan from Alaska in 1969, it has built a portfolio of nine non-operated LNG export investments in Australia, Indonesia, Malaysia, Brunei, Oman and Russia, many in conjunction with Shell.

PetroChina Company Limited is China’s largest oil and gas producer and supplier, as well as one of the world’s major oilfield service providers and a contractor in engineering construction. PetroChina launched three LNG projects in June 2004, two of which have recently begun operations. PetroChina and Shell are developing the Arrow LNG export project in eastern Australia.