It’s amazing how a string of sunny days and the sighting of a couple of robins in the backyard can lift the spirits and give you a more optimistic outlook, even on the possibility of a positive Final Investment Decision (FID) on the LNG Canada project in Kitimat.
Especially given what Royal Dutch Shell had to say at the end of last month in its 2018 LNG Outlook.
Shell holds the major stake in the Kitimat project at 50 per cent with minority stakes being held by PetroChina (20 per cent), Korea Gas (15 per cent) and Mitsubishi of Japan (15 per cent).
Shell’s message was the days of a glut of LNG are about to come to an end and that unless new production comes on line, demand will outstrip supply by the mid-2020s.
Maarten Wetselaar, the company’s head of integrated gas and new energy, said it expects demand will grow from about 300 mtpa (million tonnes per annum) in 2017 to around 500 mtpa by 2030.
Steve Hill, head of Shell’s gas trading and marketing, pointed out that the amount of new LNG supply that had come online in the last two years was 50 mtpa but only 7 mtpa of new capacity had been approved in that span.
And while there are some current projects that still have to come on line – including Shell’s own Prelude floating LNG plant in Western Australia expected to be operational later this year – their capacity is not nearly enough to fill that gap.
For example Qatar, the number one LNG producer in the world, plans to significantly hike production from its North Field deposit from the current 77 mtpa to 100 mtpa, but that equates to only a little over 10 percent of Shell’s projected shortfall.
One thing working in LNG Canada’s favour is that Prelude represents the end of its current capital investment cycle and, since it is not a company that stands still, it is looking for projects to invest in as part of the new cycle.
Now, before we get too excited, Shell did not specifically mention the Kitimat project in its Outlook. And the fact it has capital investment money available doesn’t mean necessarily that LNG Canada is going to be the automatic beneficiary.
But Stream Asset Management’s chief market strategist Dan Tsubouchi told the Financial Post the company dropped some pretty heavy hints.
“Boy, did they say a lot about it by the way they described how the supply gap is coming big time. They’re clearly telling us that LNG Canada is at the top of their list for LNG projects.”
We can only hope he’s got it right.
That said, there is predictably a but, actually two buts.
But they will have to wait for next time.