The Canadian LNG industry entered the new decade with only a single sanctioned LNG export project: Trains 1 and 2 of Shell-operated LNG Canada, located in Kitimat, British Columbia (B.C.). Following LNG Canada’s positive final investment decision (FID) in October 2018, sentiment around Canada’s LNG potential grew increasingly cautious as 2019 progressed with no additional FID activity. By November 2019, industry voices were warning of Canada’s late arrival to an increasingly crowded global LNG market. 4Q19 impairments by Chevron and Woodside of their respective shares in the Kitimat LNG project only seemed to compound this sentiment.
Although Canada will not become the LNG behemoth envisioned by industry players and policymakers prior to the onset of East Asian price volatility in 2015, several developments over the past year suggest that there may yet be potential for additional large scale LNG development in the long-run. Most importantly, there has been a concerted push for greater integration between export projects and local sources of supply, both in terms of upstream acquisitions made by LNG operators, as well as producer-led export initiatives. While current proposals vary in feasibility, the trend nevertheless indicates that Canada’s active remaining LNG players maintain a long-term interest in the industry.
The shift towards integrated LNG models
Whereas LNG Canada always featured a high degree of overlap between its working interest partners and upstream suppliers in the prolific Montney play, smaller LNG players have increasingly moved towards an integrated model through major upstream acquisitions in the Western Canadian Sedimentary Basin (WCSB).
With the acquisition of Canbriam, Rystad Energy estimates that Pacific will be able to ramp up its Montney output with a modest level of drilling activity and operate as an integrated LNG player by the time Woodfibre is commissioned in the mid-2020s.
This is an abridged version of an article that was originally published in the April 2020 issue of LNG Industry. The full version can be read here.
Read the article online at: https://www.lngindustry.com/special-reports/08042020/canadian-lng-the-road-to-success/