Shell front-runner for Canadian LNG export project

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(Bloomberg; June 11) - Shell is pushing ahead of competitors in the race to be the first exporter of Canadian LNG to Asia. Its deal this month with TransCanada to build a $4 billion pipeline to move gas from northeast B.C. to a coastal terminal makes Shell the likely front-runner, said Bob Schulz, a business professor at the University of Calgary who specializes in the oil and gas industry. Shell's partners in the project are Mitsubishi, Korea Gas and PetroChina, based in the world's three largest LNG importing markets.

"Shell's proposal is much stronger now with the pipeline," Schulz said. "The first-mover advantage is really important." Joining Shell in the Canadian race are groups including those led by Houston-based Apache Corp., the U.K.'s BG Group and Haisla Nation, an aboriginal group in Kitimat, B.C. The difficulty is finding buyers willing to sign long-term contracts and then wait years for the project to get built, said Mary Barcella, a director of North American natural gas at IHS Inc., which provides analysis to energy companies.

"The early movers will definitely have an advantage," Barcella said. "As you build up capacity, you start to get prices softening." There may be room for two or three LNG projects in western Canada, given Japan's changing views on nuclear power and volatile oil prices, said Fadel Gheit, an oil and gas analyst at Oppenheimer & Co. in New York. Shell has "much deeper pockets" than some competitors, he said. Shell already controls almost a third of the global market for LNG. 

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