Global gas giant Shell (SHEL.L) has agreed to buy two million metric tons of liquefied natural gas (LNG) per year from Ksi Lisims LNG, partners in the proposed C
anadian project said on Monday.
British Columbia's Pacific coast is close to Canada's vast
Montney shale field and has a relatively short shipping distance to Asian
markets.
Natural gas is in high demand from Asia to replace coal,
which creates higher emissions. But an expected ramp-up in global LNG
production risks creating a supply glut after 2025, the International Energy
Agency said in October.
Ksi Lisims would be one of Canada's first LNG export
facilities if built and its second-largest, but it has not yet passed all
regulatory hurdles.
Shell is looking to increase its LNG volumes by 20% to 30%
by the end of the decade and leads the LNG Canada project under construction in
British Columbia (B.C.). That project would produce 14 million metric tons of
LNG a year with shipments beginning in 2025.
Ksi Lisims, a co-development of the Nisga'a Nation, Rockies
LNG Partnership and Western LNG, would produce 12 million metric tons of LNG
annually from two floating LNG production and storage facilities. Exports may
start in late 2028.
Western CEO Davis Thames said the project expects to
announce more sales agreements in the coming months but has not decided how
much of its total production it will commit to contracts.
The facilities would run on hydro-generated electricity to
become net-zero emissions by 2030 as required by the B.C. government. That plan
depends on utility BC Hydro expanding transmission lines to serve LNG and
mining projects in northwest B.C.
Ksi Lisims applied to the B.C. government for an
environmental certificate in October and may receive a decision by year-end,
Thames said.
Rockies LNG, another partner, is a group of natural gas
producers including Tourmaline (TOU.TO) and Ovintiv (OVV.N).
LNG Canada's first phase is expected to open mid-decade and
the company is considering sanctioning a second phase.
Woodfibre LNG, owned by Pacific Energy and Enbridge (ENB.TO) is the other B.C. export facility entering construction. Woodfibre, which will produce 2.1 million tons annually, has agreements to sell most of its LNG to BP Plc (BP.L). Reuters