Shell plans Calgary LNG plant

Dutch oil giant Royal Dutch Shell plans to make a plant near Calgary to process natural gas as a fuel for heavy duty vehicles.

Dutch oil giant Royal Dutch Shell plans to make a plant near Calgary to process natural gas as a fuel for heavy duty vehicles.

The company says it wants to produce liquefied natural gas or LNG at its Jumping Pound facility in the foothills outside Calgary by 2013. The gas will be available for heavy-duty fleet customers beginning in 2012 at select Shell Flying J truck stops in Alberta, initially provided by third-party partners.

The Jumping Pound facility will be Shell's first investment of its kind for Shell globally and will include production facilities and downstream infrastructure. The company did not provide any specifics for the number of jobs that might be created at the plant.

Global LNG capacity is expanding exponentially, as major companies move to create LNG infrastructure to keep up with growing power demand, especially from Asia.

Earlier this year, Shell announced it would create the world's largest floating object ever — a platform capable of producing 110,000 barrels per day, moored 200 kilometres off the coast of Australia, that's larger than four football fields.

Driven to export the fuel to the Chinese market, other Canadian energy names are rushing to increase LNG capacity in British Columbia. Shell is itself looking at working with Chinese, Korean and Japanese firms to build an LNG export facility on B.C.'s coast.

LNG is prized as a fuel because once cooled to a suitable temperature, it takes up less than 0.2 per cent of the volume it does in gaseous form. It also burns cleaner than petroleum fuels, and is comparatively abundant.

It's already widely used among heavy industries and some mass transportation vehicles such as city buses. But it is not yet prevalent with passenger vehicles. Companies have been looking at the transportation sector as a potential new market for a commodity that has dwindled in price for the past several years.

"With an abundance of natural gas and a growing need for low-emission transportation fuels, today signals a very important step for a significant North American resource," Shell Oil president Marvin Odum said.

"As global demand for transportation fuels increases, including for LNG, Shell is well positioned to meet this demand."

Shell will partner with Canadian green technology firm Westport Innovations, in a co-marketing agreement to help make gas-powered vehicles more widely accepted with consumers.

"We believe the use of natural gas as a fuel for transportation will accelerate," Westport CEO David Demers said. "The North American launch is an important first step."

TSX-listed Westport shares were briefly halted on the news, but the stock gained nearly 17 per cent — or $3.84 — to $26.50.

Shell is also partnering with Wärtsilä North America to promote LNG in the U.S. marine industry, and with General Electric's transportation division to promote the use of LNG to power the railway industry.