Shell-BG Group merger a game changer for B.C.’s LNG industry – by Brent Jang (Globe and Mail – April 9, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

VANCOUVER — A global powerhouse in liquefied natural gas has emerged in a blockbuster merger that is expected to reshape British Columbia’s LNG industry.

Royal Dutch Shell PLC’s £47.7-billion ($88-billion) deal to buy BG Group PLC creates a liquefied natural gas giant, and will allow the combined company to choose which energy projects to keep or jettison within B.C.’s fledgling LNG sector. The merger will bolster the Shell-led LNG Canada project in Kitimat while hampering BG’s chances near Prince Rupert, as pressure mounts for players to either drop out or consolidate to cut costs.

There are 19 LNG proposals in B.C., though only three or four projects at most have a realistic chance to survive amid fierce global competition and a looming glut of LNG supplies. “We’re going to see some consolidation amongst the LNG projects. There really isn’t room for all of them,” BMO Nesbitt Burns Inc. energy analyst Randy Ollenberger said in an interview.

Premier Christy Clark describes the LNG industry as a once-in-a-generation opportunity to improve the province’s finances and create tens of thousands of jobs. She campaigned hard in touting LNG’s prospects during B.C.’s general election in May, 2013. Her B.C. Liberal government boasts that the LNG sector could transform the provincial economy.

Ms. Clark is sticking with her prediction that companies will be operating three LNG terminals in B.C. by 2020.

“Partnerships change and continue to change in the global energy industry. It’s a healthy aspect of the business,” a B.C. Natural Gas Development Ministry spokeswoman said Wednesday.

The new Shell-BG partnership changes the game.

In northwestern B.C., the Shell-led LNG Canada joint venture in Kitimat gains momentum. That proposal is further advanced than BG’s Prince Rupert LNG project slated for Ridley Island, industry experts say.

LNG Canada estimates that it will cost up to $40-billion to develop a massive LNG export terminal in Kitimat. Royal Dutch Shell, through Shell Canada Energy, owns 50 per cent of the project, with partners from China, Japan and South Korea.

“Shell would be at an advantage over BG in B.C.,” Mr. Ollenberger said. “BG has a low-probability project.”

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