June 20, 2012

Shell awards $4 billion pipeline contract

COPYRIGHT TRANSCANADA CORPORATION. ALL RIGHTS RESERVED

RICHARD GILBERT

staff writer

Shell Canada Limited has awarded TransCanada Corporation a $4 billion contract to develop a proposed pipeline to transport natural gas from the Montney region near Dawson Creek, B.C. to a liquefied natural gas (LNG) facility in Kitimat, BC.

“We appreciate the confidence that Shell and its partners have placed in us to build, own and operate this natural gas pipeline in British Columbia,” said Russ Girling, TransCanada’s president and chief executive officer.

“We will work collaboratively with them, Aboriginals and other stakeholders as we launch into the initial phases of consultation and regulatory review.”

The Coastal GasLink project involves the construction of about 700 kilometres of large diameter pipe with an estimated initial capacity of 1.7 billion cubic feet per day.

It is estimated that 2,000-2,500 direct construction jobs will be generated by the project during a three year construction period.

Applications for required regulatory approvals still need to be submitted to the applicable provincial and federal agencies.

The project is expected to be completed by the end of the decade, but is subject to regulatory and corporate approvals.

The Kitimat natural gas export facility is jointly owned by a group of companies led by Shell, that have plans for the construction of an LNG export facility near Kitimat.

The partners, Korea Gas Corporation (KOGAS), Mitsubishi Corporation, and PetroChina Company Limited, will decide whether to move ahead with the project’s development after conducting engineering work and environmental assessments.

The proposed project includes the design, construction and operation of a gas liquefaction plant and facilities for the storage and export of LNG, including marine off-loading facilities and shipping.

The project is expected to create thousands of jobs during construction and hundreds of full-time, permanent jobs during operations.

Start-up is also expected around the end of the decade, assuming all the necessary regulatory approvals are obtained and investment decisions made.

Shell holds a 40 per cent interest in the LNG Canada project, with KOGAS, Mitsubishi and PetroChina each holding a 20 per cent interest.

Both of these projects want to take advantage of Western Canada’s abundant supplies of natural gas, by exporting the commodity to global markets, in particular Asia’s dynamic and fast-growing economies.

Kitimat is also proposed as the western end of Enbridge’s planned $5.5 billion dollar Northern Gateway Pipeline to carry oilsands crude from a terminal near Edmonton.

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