Shell Canada
A Shell Canada LNG ship in Singapore.

Shell Canada announced plans in May for Canada’s largest liquefied-natural-gas, or LNG, facility on British Columbia’s central coast near Kitimat. Shell also is considering an option for the future expansion of the facility, dubbed LNG Canada.

With Shell Canada holding a 40% stake and the Korean Gas Co., Japan’s Mitsubishi Corp. and PetroChina eaching holding a 20% stake, the proposed facility includes two processing “trains” with a total capacity to handle 12 million tons of LNG annually.

The Shell Canada facility represents the largest of four LNG sites now proposed for the Kitimat area. While Canada’s largest, LNG Canada still falls short of the largest facilities worldwide. For example, Cheniere Energy’s proposed Sabine Pass LNG facility in Louisiana will process 16 million tons per year, and the South Hook plant in Wales now produces 15.6 million tons annually. 

Even so, LNG Canada is a project of “world-scale significance," says David Williams, a Shell spokesman.

The scope of Shell Canada’s Kitimat project includes design, construction, operation, storage and marine off-loading facilities. No financial figures were released by Shell Canada, but comparisons to other plants worldwide easily put the facility at more than $10 billion to possibly $20 billion in construction costs.

Williams says there is enough Canadian gas available to supply LNG Canada, and gas output has doubled between 2005 and 2010, a trend Shell Canada expects to continue, especially in the Asian markets, which explains the company's partnerships.

Front-end engineering and design will heat up in 2013, an investment decision should be made by mid-decade, and start-up—assuming all necessary regulatory approvals—is expected by 2020, Williams says.

LNG demand exists for such projects, says Eugene Vath, a Canadian Scotiabank energy analyst, but adds that is “tough to say where [that demand] goes in four years, with Australia and Papa New Guinea also getting projects up and running."