ASX-listed Calima Energy (ASX: CE1) has welcomed the news that a Shell-led JV has approved the go-ahead for the massive LNG Canada project at Kitimat.
Calima, which is preparing to drill its first well in its Montney project area in Canada, is expected to see benefits from the billions in new infrastructure that will located near its assets, as well as a forecast increase in local gas and liquids pricing.
Calima Energy managing director, Alan Stein, said the go-ahead for LNG Canada was very positive news, with the Company’s 72,000 acres of Montney rights located immediately adjacent to the pipelines that will feed the new LNG projects at Kitimat.
“Opening up the Montney to new international markets with crude based pricing is great news for producers and resource owners,” Mr Stein said.
“With five additional projects already approved by Government we expect more FID decisions to follow. Prices for Montney drilling rights have almost doubled this year and we expect that trend to continue on the back of this news.”
The LNG export facility, which will be built in Kitmat, British Columbia, includes the design, construction and operation of an LNG plant and facilities for the storage and export of LNG, including marine facilities. LNG Canada will initially consist of two LNG “trains,” for a total of approximately 14 million tonnes per annum with the potential to expand to four trains in the future.
In announcing the “green light” for LNG Canada, Royal Dutch Shell CEO, Ben van Beurden, said Shell believes “LNG Canada is the right project, in the right place, at the right time.”
“With significant integration advantages from the upstream through to trading, LNG Canada is expected to deliver Shell an integrated internal rate of return of some 13%, while the cash flow it generates is expected to be significant, long life and resilient.”
Leading international industry analysts Wood Mackenzie has estimated that the initial LNG Canada project costs at US$18 billion for the LNG plant investment and US$3.5 billion for the pipeline.
They also noted that Western Canada is strategically well located for supplying North Asia and that the project will be viewed as a confidence booster for the broader investment sentiments for Canada.
The positive Canadian development news was further boosted when TransCanada subsequently announced that it will construct the Coastal Gaslink pipeline following the Kitimat sanctioning.
The Coastal Gaslink a pipeline project is specifically planned to bring Montney gas molecules to the west coast and reinforces the expected domino effect of new developments that will follow the sanctioning of LNG Canada.
A review of infrastructure opportunities in the Montney undertaken by Calima Energy earlier this year identified LNG Canada as potentially providing significant benefits for the Company’s project development plans.