LNGC Phase 2 FID; Two New Ksi Lisims Sales Agreements

Highlights

• The consortium behind LNG Canada announced its final investment on Tuesday, September 29th.
• Ksi Lisims LNG announced two new "Heads of Agreement" with buyers, the Australian gas company Santos and the British gas company Centrica

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Details

LNG Canada Phase 2 FID

The CEO of Shell, Mark Carney, David Eby, and a slew of other executives were in Vancouver on September 29th to announce that LNG Canada Phase 2 would be moving forward. This will double the project's export capacity from 14 mtpa to 28. It also requires the construction of five new compressor stations on TC Energy's Coastal GasLink pipeline that will enable the line to more or less double its capacity. The leaders of the First Nations consortium that has an "equity option" to buy the project's new LNG storage tank for $1 billion were also at the press conference, but there were no updates on whether this "equity option" is turning into an actual investment.

Carney said construction on both the facility and the compressor stations would begin immediately. The facility's turbines will be built in Italy, much of the engineering work will be done in Japan, and, as with Phase 1, the massive steel modules required for the liquefaction trains are being built in China. Despite earlier promises by the BC government, Phase 2 will continue to burn gas to power its processes. It will not be electrified.

Ksi Lisims HoAs

Ksi Lisims signed an HoA with Santos, an Australian gas company (and LNG producer in its own right), on September 15th, for 1 mtpa. It signed another 1 mtpa HoA with Centrica, a British gas company and international gas trader, on September 30th. Neither of these are binding SPAs (though as with Ksi Lisims's earlier contracts, they've been reported by both the Canadian government and media as though they are) and it remains to be seen whether they transform into real contracts.

Despite the Canadian government's rhetoric about supplying gas to "our allies," it is extremely unlikely that either Australia or the UK will ever import an LNG shipment from Canada. Both Santos and Centrica are global LNG traders, and if these HoAs turn into real contracts, it will be because those companies believe they can profit by selling LNG to other customers for more than they paid for it, not because Australia or the UK need the gas.

Somewhat ironically, earlier this year, LNG demand in Asia was so low that an Australian company—possibly Santos, though we can't be sure without access to historical shipping data—shipped a tanker through the Panama Canal all the way to Eastern Canada. LNG demand in Asia fell throughout last year and is continuing its decline this year.