Shell takes FID on $30bn LNG Canada
While Nigeria is still dillydallying on the issue of signing the final investment decision (FID) in respect of Train 7 project of the Nigeria Liquefied Natural Gas Limited, Shell, a major stakeholder, has just taken an FID on the $30 billion LNG Canada.
Having taken FID on LNG Canada construction will start immediately with first LNG expected before the middle of the next decade.
Barring any last minute changes, the Nigeria Liquefied Natural Gas Limited (NLNG) would take the Final Investment Decision (FID) on its new eight million tonnes per annum (MTPA) LNG Train-7 plant by December this year.
The sale and purchase agreements (SPAs) for the new volumes had been locked down with off-takers since 2007, but its terms would need to be concretised before the FID is achieved.
Tony Attah, managing director of NLNG, said after the company meetings with its shareholders and investors in London, a financial adviser was appointed ahead of the expected FID.
The NLNG had meetings to commemorate its repayment of $5.45 billion taken from its shareholders to build its six existing LNG trains, in addition to signing dual Front End Engineering Design (FEED) contracts with two consortia for the Train-7.
The company was banking on its $11 billion balance sheet and reported business credibility to woo investors for its Train-7 plant.
Efforts had been made to do Train-7 since 2007.
He stated: Essentially we are giving it everything we have. We ve got the best supports now, my shareholders have approved that we can go for it. We are ready and believe it is time for Train-7.
The NLNG already has existing Gas Sales Agreements (GSAs) to service Train-7, as well as SPAs.
He said: I have Gas Sales Agreements (GSAs) in place because I am a brown field and so it is not a critical factor in essence because I can improve on what I have and my gas suppliers are in agreement that we go for this, we are jointly working.
The SPAs have also been signed before, so already I have existing SPAs for Train-7. 22MTPA today and going to 30MTPA, increasing capacity by 35 per cent or more. All of the new capacities have been contracted.
What is important is that the SPAs have been signed since 2007 and we’ve been rolling them. We need to renew them and in terms of the tenure it is a conversation that has to come.
The NLNG is expected to ask for a 20-year tenure but we are not unmindful of the changing dynamics in the market, people want it shorter, the word there for us is flexibility and competitiveness.
“What we are really pursuing is not so much the tenure but value, and so we are open to discuss at an appropriate time”, Attah added
He said there are existing agreements with the current off-takers, except for one that is no longer involved but that will easily be re-distributed amongst them depending on their interest, and so that for us is the next phase to begin to test that interests. And, at the point of FID, we now have to concretise on the actual terms.
“We appointed a financial adviser and we will go to the market. We underpin a lot with our balance sheet. I have an $11 billion balance sheet, that is pretty healthy, but more importantly the result with the credibility of my company based on the loans that we paid out. For 20 years we never missed one payment, we are credible and liquid, and believe it should not be difficult.
Shell’s 40% share of the project’s capital cost is within the company’s current overall capital investment guidance of US$25-$30 billion per year.
“We believe LNG Canada is the right project, in the right place, at the right time,” said Ben van Beurden, Chief Executive Officer, and Royal Dutch Shell.
“Supplying natural gas over the coming decades will be critical as the world transitions to a lower carbon energy system.
Global LNG demand is expected to double by 2035 compared with today, with much of this growth coming from Asia where gas displaces coal. LNG Canada is well positioned to help Shell meet the growing needs of customers at a time when we see an LNG supply shortage in our outlook.