Shell applies for 25-year natural gas export licence

Share

Royal Dutch Shell plc and its three Asian partners have applied to export an enormous volume of natural gas from the British Columbia coast, as global attention begins to focus on the movement of Canadian energy to Japan, China and other markets.

On Friday, Shell said it had applied to the National Energy Board for a licence to export up to 24-million tonnes per year of natural gas. That is equivalent to 3.4-billion cubic feet per day, fully a quarter of Canada's entire output in 2011.

Shell, which has partnered with Korea Gas Corp., Mitsubishi Corp. and PetroChina on an export terminal slated for Kitimat, B.C., is asking for approval to export gas for 25 years.

The partners intend to build their initial terminal to half the capacity they are requesting, "with an option to expand the project to a total of four units or 24 million tonnes," spokesman David Williams said in a statement.

"The application is an important milestone in the regulatory process and assures that there are sufficient natural gas reserves in Canada to meet domestic needs and exports."

Outside of export possibilities, Canada's natural gas industry faces tremendous challenges. The discovery of large new supplies of natural gas in the U.S. have raised concerns that Canadian gas will, over the course of the next decade, no longer be needed south of the border.

At the same time, northeastern British Columbia has proven to possess enormous gas reserves. In June, for example, Apache Corp. said it had drilled a well in the province's far northern Liard play that was the most prolific shale gas test in the world. Apache is leading a separate project to build an LNG export terminal in Kitimat.

Shell has declined to estimate the cost of its terminal. On Friday, however, TransCanada Corp. chief executive Russ Girling pegged it at $12-billion, plus a $4-billion pipeline to deliver gas from the B.C. northeast.

Natural gas exports offer the possibility of selling gas into international markets, where gas prices are linked to oil prices, and are much higher as a result.