European oil biggie Royal Dutch Shell Plc (RDS.A) along with Asian partners – Japanese energy giant Mitsubishi Corporation, state-controlled China National Petroleum Corporation and Korea Gas Corporation – officially launched the liquefied natural gas (LNG) terminal project in Western Canada, near Kitimat, British Columbia.
The companies will execute all necessary engineering and evaluation works plus conduct meetings with the local authorities regarding the prospects and potential of the venture.
The project, which is expected to come online by the end of 2020, involves the design, construction and operation of a gas liquefaction unit as well as LNG facilities for storage, export and marine off-loading facilities and shipping purposes.
The initial phase of the venture will have two LNG processing units or trains. Each unit will have an annual production capacity of six million tons of LNG, with the possibility of expansion in the future.
Shell controls 40% interest of the venture, while the other three companies have an equal share of 20%.
Shell and its partners have decided to put up this unit to facilitate a smooth supply of LNG to the Asian market to satiate the growing demand of the region.
Additionally, excess supply of natural gas has pulled down the North American markets, forcing many companies to look for alternative routes. Hence, the big energy firms are eyeing the potentially rich Asian land that still offers a high price for LNG.
In October last year, Shell had first announced the plans for this venture, following the purchase of the dormant Methanex marine facility in Kitimat along with other partners. In February 2012, PetroChina Co. Ltd (PTR) – unit of China National Petroleum Corp. – agreed to fund the gas development project, becoming Shell’s financial associate.
Apart from this venture, the Kitimat area also holds two planned liquefaction projects – Kitimat LNG that is controlled by Apache Corp (APA), Encana Corp (ECA) and EOG Resources (EOG); and BC LNG, monitored by a 13-member private cooperative.
We believe that Shell owns a strong and diversified portfolio of global energy businesses that offer attractive long-term growth opportunities. The group – renowned for its success in bringing some of the largest and technically challenging capital-intensive projects to fruition – is expected to continue accelerating revenue and earnings growth over the next few quarters.
However, the company remains susceptible to its exposure to oil and gas price fluctuations, lofty capital spending and international business risks. As such, we see Shell performing in line with the broader market and maintain our Neutral recommendation.
APACHE CORP (APA): Free Stock Analysis Report
ENCANA CORP (ECA): Free Stock Analysis Report
EOG RES INC (EOG): Free Stock Analysis Report
PETROCHINA ADR (PTR): Free Stock Analysis Report
ROYAL DTCH SH-A (RDS.A): Free Stock Analysis Report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment