British Columbia

Shell postpones decision on LNG plant in Kitimat

The $40B US LNG Canada export project proposed for Kitimat appears to have suffered a setback with Royal Dutch Shell announcing it will postpone its final investment decision.

Shell announces earnings down 44 per cent on low oil and gas prices

An artist's rendering of the proposed LNG Canada project in Kitimat, B.C. (LNG Canada/Flickr)

The huge LNG Canada export project proposed for Kitimat appears to have suffered a setback with Royal Dutch Shell announcing it will postpone its final investment decision, which was expected this month, until the end of the year.

The announcement comes on the heels of Shell releasing 2015 fourth-quarter results which show a 44 per cent slump in earnings due largely to the slump in oil prices.

"Operating costs and capital investment have been reduced by a total of $12.5 billion as compared to 2014, and we expect further reductions in 2016," said Shell CEO Ben van Beurden.

Shell owns a 50 per cent stake in LNG Canada. PetroChina, Korea Gas Corp. and Mitsubishi Corp, are also stakeholders in the joint venture. 

LNG Canada responded to a CBC News request for interview with a statement:

"We have always stated that our Joint Venture Participants plan to make a Final Investment Decision in 2016," wrote Andy Calitz, CEO of LNG Canada. "We are pleased, given the current oil and LNG prices, and turmoil in global energy markets, that the Joint Venture Participants in LNG Canada are still working towards a Final Investment Decision for the proposed facility later this year."

Premier Christy Clark said the news from Shell was a positive development in light of the turmoil in the oil and gas industry worldwide.

"To me the good news is that when you see energy projects getting canceled all over the world Shell Canada, LNG Canada announced that they are recommitting to the project in British Columbia." said Clark. "The dates changed, but their commitment to it hasn't."

Last month LNG Canada cleared an important hurdle when it was granted the first permit to build a liquefied natural gas export facility in northern British Columbia.

The project could cost up to US$40B and would initially consist of two processing units called trains, each able to produce 6.5 million tonnes of LNG annually. The facility could be expanded to four trains in the future.