There were some great tweets yesterday from Business in Vancouver’s Nelson Bennett on quotes from LNG Canada CEO Andy Calitz. Bennett tweeted [LINK] “Andy Calitz, CEO for LNG Canada, tells #GLOBEforum plan is to start construction on Kitimat project 2018, FID documents being prepared”, and even more significantly “Direct quote: “At the time (2016) we said we wanted to be in construction in 2018. My answer remains unchanged.”
We know this is not a promise or guarantee, and CEO Calitz is clear that this is a want. Preparing FID documents is not new and is exactly what they have indicated publicly ie that a decision is being made in 2018 if the joint venture will or will not proceed on LNG Canada. And he is not guaranteeing or committing to be in construction in 2018, rather he is reminding of his wants. However, knowing that there is increasing focus on LNG Canada following the recent LNG views by Shel and the market now moving to a view that new LNG supply is needed post 2020, we have trouble believing an experienced CEO would choose to reiterate that it wants to be in construction unless that was also his expectation. Is it a want, but also an expectation? That is the question.
The other significance is that to be in construction in 2018 means FID is approved earlier ie. sometime this summer. We have previously noted that there are seasonal construction windows and that is why have previously viewed that any FID would come in the late summer.
Our recent Feb 21, 2018 blog “Shell Called Tight LNG Markets >7 Mths Ago, Will They Keep Hinting And Pointing To LNG Canada FID Being Likely In 2018?” [LINK] outlined Shell’s public comments for the past few months and how they pointing to LNG Canada being the top of their list for LNG FIDs in 2018. The blog concluded “We don’t expect to see a LNG Canada FID until the summer. After all, LNG Canada is not just Shell, and we would expect to see a coordinated approval by all of the other joint venture partners – CNPC, Kogas and Mitsubishi. And LNG Canada is still trying to grind down the project costs. On Monday, Shell is probably not going to say we told you so, but we expect them to continue to say the same LNG market themes as Wetselaar did on Sept 5 – it’s a tight LNG market, the market is balanced, all new LNG supply is being absorbed by demand, and a supply/demand gap is emerging for the early 2020’s. And we expect them to portray LNG Canada as they have in the recent disclosure – its near term investible (FID ready) if they choose to go ahead. LNG Canada also provides a new geographic supply source that will fit into Shell’s strategic positioning for changing LNG markets. And unless Shell makes a big change from its Q4/17 call comments and Van Beurden’s Davos comments, we have to believe the hints will continue to point to LNG Canada as the next to go to FID and likely in 2018.”
We know there are still issues. LNG Canada has been publicly clear that they still want to get the costs down. So there is still risk and events can change, but all we continue to see is positive views from Shell that the LNG market is moving to undersupply sooner than expected, there is a need for new LNG supply post 2020, and LNG Canada is likely the top of their list for the next LNG FID. Shell is the major joint venture partner in LNG Canada, and now we see a want (or is it an expectation?) from LNG Canada to be in construction in 2018. It may not be a guarantee, but it feels like an expectation from an experienced CEO with major global joint venture partners. Its another sign or hint to point to a FID for LNG Canada this summer.