By Rebecca Penty, Calgary Herald, May 29, 2012
Shell CEO pushes regulatory certainty for Asia-focused projects
CALGARY — The head of Royal Dutch Shell PLC says improving regulatory certainty in Canada is key to seizing upon a “narrow window” this decade in which West Coast liquefied natural gas projects must be built to vie for a slice of a growing Asian market.
Peter Voser, the 53-year-old chief executive of the Anglo-Dutch supermajor behind the largest LNG export terminal proposed in Canada, said Tuesday that projects in British Columbia need government approval and shovels in the ground “in the coming years,” to compete with a number of global facilities starting up in five to six years.
“I think it needs to get done in this decade, certainly, and you have quite a few years of construction, because the Asia-Pacific LNG market will more or less double by 2030,” Voser told reporters during a Calgary media availability following a meeting with Canadian employees of Shell, slotted into his two-day Canadian trip that began on Tuesday.
The Harper government, in its March 2012 budget, committed to a streamlining of regulatory review for major projects in Canada that mandated set timelines for decisions. Joint federal-provincial reviews will get the maximum two-year timeline under new rules that environmental advocates blasted, arguing Ottawa is set to start rubber-stamping industrial projects that could pose significant risks.
Voser said reviews can be done efficiently, effectively and under firm timelines required by companies to make investment decisions, while at the same time ensuring projects are developed in a sustainable and environmentally responsible fashion.
“We need to have this clearly, efficiently done. I think it can be done in the way the government is thinking now, and I personally would be more than happy to use our LNG project to be the pilot of this,” he said.
The Canadian division of Shell, among the largest LNG suppliers in the world, has a 40 per cent working interest in a proposed two billion cubic feet per day facility to start up this decade near Kitimat, B.C. with Asian partners Korea Gas Corp., Mitsubishi Corp. and PetroChina Co. Ltd., the biggest among six LNG projects currently proposed for sites near the remote community.
On Tuesday, Voser declined to share internal cost estimates and when the operation could come online.
Various media reports have put the price tag at $12 billion and a website of the Haisla First Nation in Kitimaat Village nearby — which bought into the separate proposed Douglas Channel LNG project — notes the First Nation has begun consultations with Shell on the project and that it could cost upwards of $10 billion.
Proponents of B.C. projects envision selling western Canadian gas, hovering near decade price lows, to Asian buyers lately paying premiums as high as eight times North American prices for tankerloads of the chilled, liquefied gas. Only two projects, Douglas Channel LNG and Kitimat LNG, have received regulatory approval but the companies separately backing each have yet to make sanctioning decisions.
Voser said Shell’s global relationship with China National Petroleum Corp. and the state-owned firm’s subsidiary PetroChina could grow in Canada, where the companies are partners on the LNG project and in developing Shell’s Groundbirch shale gas play in northeastern B.C.
“There could be more,” Voser said.
Shell’s upstream gas development, LNG project and its sizable oilsands and heavy oil footprint will take up a growing piece of the global firm’s spending currently at about $32 billion per year, he said.
News on new gas pipeline infrastructure in Western Canada could be forthcoming, Voser suggested.
“Shell is normally not investing in pipelines but we actually commit capacity, so that someone else can actually build it. And you will see over the next weeks or months that on the gas side, LNG side, (where) we were looking into who can build those pipelines, you could see some news.”
There are currently no pipelines linking gas gathering systems in northeastern B.C. with the Kitimat region. Advisory firm Ernst & Young recently suggested infrastructure needed over the next decade to support LNG development in Canada will cost $50 billion, including pipelines.
FirstEnergy Capital Corp. analyst Steven Paget said there’s little regulatory risk around LNG projects in Canada, given support from all B.C. political parties, that Canada has a history of exporting gas and that gas pipeline developments are less contentious than oil projects.
“Certainly there’s a risk in being involved in land claims disputes, but I also note that there has been serious First Nations support for LNG, including the Haisla First Nation,” Paget said, suggesting a bigger hurdle could be building projects in far-flung Kitimat, given an already tight labour market.
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