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Shell Canada buys land for LNG terminal

Shell Canada has reportedly bought land on Canada’s west coast for a proposed liquefied natural gas (LNG) plant, the country’s third export outlet for growing volumes of unconventional gas

Shaun Polczer, CALGARY

According to wire reports, the company has purchased an old terminal in the Douglas Strait from Cenovus Energy for an undisclosed sum. There was no immediate confirmation from either party. Shell has previously said it is “exploring the potential” for Canadian LNG exports but offered no further details.

If so, Shell would join a growing field of players looking to send Canadian gas to Asia. In mid-October, a consortium of Encana, Apache and EOG Recources was granted Canada’s first LNG export licence; and Malaysian state-owned Petronas has teamed up with Calgary-based Progress Energy in an upstream production deal that includes provisions for an export terminal. Last week, pipeline operator Enbridge committed almost C$1 billion ($1.03 billion) to developing gas transport and processing infrastructure and said it is interested in gaining a stake in an LNG terminal.

Although in the early stages, the developments are expected to alleviate a bottleneck for Canadian shale plays such as Horn River, which are effectively stranded because of their remote geographic location. The stakes are high for the Horn River producers, which some estimates suggest are sitting on one of the largest gas deposits in North America. But without buyers, it’s a moot point - further underscoring a fundamental restructuring of North American gas markets away from high-cost fields.

Encana chief executive Randy Eresman described Shell’s entrance as welcome. Company officials also expressed hope the new terminals would allow it to continue to increase production from British Columbia’s remote gasfields. Encana has a production joint venture with Kogas of South Korea, the largest buyer of LNG after Japan, and other big LNG players, such as Mitsubishi, have sealed similar deals with Canadian producers.

But Shell’s rapid ascent is noteworthy given that it already is a large unconventional gas producer in Canada and its significant role throughout the global LNG industry. While it clearly gives legitimacy to Canada’s LNG aspirations, only time will tell if it becomes a significant player on the world stage.

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