VANCOUVER (Reuters) - British Columbia’s ambitions to become North America’s next major liquefied natural gas exporter took another hit on Thursday, as Royal Dutch Shell pushed back a final investment decision (FID) on its LNG Canada project to late 2016.
The delay came as Europe’s largest oil company reported its lowest annual income in over a decade and said it would take further steps to cut costs to cope with weak oil prices if needed.
LNG Canada, located on British Columbia’s rugged northern coastline, is one of the frontrunners in a now slowing race to build Canada’s first LNG export terminal. It has already been granted its key environmental permits.
A Petronas-led project, also in the province’s north, was given a conditional FID in June 2015, but an environmental review is still underway and could be further delayed by new rules requiring reviews to consider the emissions of upstream gas production.
British Columbia’s ruling Liberals, meanwhile, had been banking on having three LNG export terminals in operation by 2020, delivering new jobs in the near-term and bolstering government coffers in coming years.
Shell has in the last year scrapped numerous multi-billion dollar projects, including a controversial exploration project in the Alaskan Arctic Sea, the Bab sour gas field in Abu Dhabi and Carmon Creek oil sands project in Canada.
“We are postponing the final investment decision on LNG Canada right through the end of this year,” Chief Executive Ben van Buerden told investors on a conference call.
The LNG Canada partners - Shell, along with PetroChina Co Ltd, Korea Gas Corp and Mitsubishi Corp - had planned to take FID in the first half of 2016.
Despite the delay, the team on the ground remained upbeat, noting that early work is moving ahead and the added time will be used to further derisk the C$25 billion ($18.22 billion) to C$40 billion ($29.15 billion) development.
LNG prices are sinking as demand for the super-chilled gas slows and new supply from the United States, Australia and Russia is set to hit the market through 2021.
Despite the near-term glut, Shell executives said they anticipate demand from China and other countries to increase through the next decade.
Reporting by Julie Gordon; Editing by Meredith Mazzilli