Shell Delays Canada Gas Export Plans Hampered by Crude Slump

  • Leader of LNG Canada project postpones investment decision
  • LNG market facing a glut with 15 bcf/d of capacity being built

The crude oil slump is throwing a wrench into Canada’s ambition to be a global natural gas market player.

Royal Dutch Shell Plc, one of the front-runners among almost two dozen liquefied natural gas export proposals along the nation’s Pacific Coast, on Thursday delayed plans to make an investment decision on the megaproject to the end of 2016, as lower global oil prices crimp its ability to spend. A group of companies backing the shipping terminal, pipeline and drilling project led by Shell had planned to rule on whether to proceed with construction in the first half of the year.

“Only the most competitive projects are going ahead,” Shell Chief Executive Officer Ben Van Beurden said Thursday on a conference call with analysts to discuss fourth-quarter earnings results. “This is to manage affordability and get better value from the supply chain in this downturn.”

Analysts such as Citigroup Inc.’s Ed Morse have cast doubt on Canada’s ability to deliver LNG exports this decade, even as the nation’s gas producers yearn for a new outlet with U.S. output increasingly pushing them out of their traditional market. A glut of LNG is emerging globally as ventures start up in Australia and the U.S. and more than 15 billion cubic feet a day of capacity is under construction, according to FirstEnergy Capital Corp., as demand slows in Asia. The oil rout has also taken down LNG prices, linked to crude.

“This is unfortunate news,” Steven Paget, an analyst at FirstEnergy in Calgary, said Thursday in a phone interview. Among Canadian companies it hurts is TransCanada Corp., which the Shell-led group had hired to build their pipeline, he said. “It’s very hard to sanction a project in a glutted market.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE