Shell postpones LNG Canada final investment decision as profits plunge

Royal Dutch Shell is postponing a final investment decision on its proposed liquefied natural gas mega-project in British Columbia as it grapples with plummeting earnings due to low energy prices.

VANCOUVER — Royal Dutch Shell is postponing a final investment decision on its proposed liquefied natural gas mega-project in British Columbia as it grapples with plummeting earnings due to low energy prices.

Chief executive Ben van Beurden said Thursday that the company was delaying a final commitment on the LNG Canada project in northwestern B.C. as it makes “substantial changes in the company” that will likely include further spending cuts on top of the $12.5 billion it cut last year.

A final decision on the LNG Canada project had been expected in the spring, but Shell Canada spokeswoman Tara Lemay says the joint venture behind the project will now make a decision by the end of the year.

“The LNG Canada joint venture partners have agreed that due to market conditions, it makes sense to shift the final investment decision to late 2016. In the meantime, the joint venture will continue to work on the competitiveness of the project,” Lemay said in a statement.

B.C. Premier Christy Clark, speaking at an energy conference in Ottawa, said she was reassured to see the 2016 commitment.

“What I was pleased to see was Shell reconfirm its intention to make a final investment decision this year,” said Clark.

“Even in these very uncertain times, which I acknowledge, that’s affected their timeline …. they’ve reconfirmed the fact they want to go ahead with this project, which is going to mean tremendous growth for all of Canada.”

Andy Calitz, chief executive of the LNG Canada joint venture, said he was pleased that a decision would be made this year given the turmoil in global energy markets, but he left open the possibility of further delays.

“Can you and I conjure up a set of conditions that could make a positive decision difficult? Yes. But could I also see that they are working to take that decision in the fourth quarter, absolutely,” Calitz said from Ottawa.

Shell reported a 44 per cent drop in fourth-quarter earnings to $1.8 billion as low oil and gas prices hit its bottom line. The company has responded by delaying projects in Canada and Nigeria and withdrawing from a project in the United Arab Emirates.

Dirk Lever, an analyst at Altacorp Capital, says the delay by Shell because of capital costs and other headwinds increases the likelihood that Petronas could delay an investment decision on the Pacific Northwest LNG project as well.

“Let’s just say the odds are higher today than they were yesterday that they will postpone,” said Lever.

The LNG Canada project already has conditional federal and provincial environmental approvals and was awarded a 40-year export licence in January.

The project is expected to cost upwards of US$40 billion and involve hiring between 4,500 and 7,500 workers.

Shell owns a 50 per cent stake in the project, which is being developed with partners Korea Gas Corp., Mitsubishi Corp., and PetroChina Co. Ltd.

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