Shell CEO says Canada is in a strong position to take advantage of LNG market

The global head of Shell SHEL-N says it’s too early to say whether the company will pursue Phase 2 of LNG Canada, but he is very heartened by what he is seeing from Ottawa and its new Major Projects Office when it comes to securing Canada’s place as a global energy superpower.

The second phase of LNG Canada, an export terminal in Kitimat, B.C., is on the list of five projects that Prime Minister Mark Carney has said will be reviewed for fast-track approval under Ottawa’s Building Canada Act. Between the world’s hunger for liquefied natural gas to displace coal – particularly in Asia – and Shell customers seeking diversified energy supplies, chief executive Wael Sawan says Canada is in a strong position to take advantage of the global LNG market.

“The setup of the Major Projects Office is indeed very much a step in the right direction as the government looks to acknowledge some of the challenges around building megadevelopments in the country, and hopefully that will expedite things in terms of where Shell is in Canada,” Mr. Sawan said in an interview Friday.

The fate of Phase 2 will hinge on three things, he said: the competitiveness of the technical bid, the state of the LNG market and the broader political climate.

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And it’s that last point where Canada needs to focus its energies to ensure it can reach its full potential, Mr. Sawan said.

A “balanced, pragmatic energy policy” that accounts for energy affordability and security – as well as emissions and the broader energy transition – is key, he said. So is ensuring that such a policy remains in place through multiple election cycles to guarantee financial returns on the kinds of massive projects Shell is involved in.

“When we look at countries to say, ‘Should we be investing $1-billion to $5-billion in a project?,’ beyond the economics of the project itself is our trust that the regulatory fiscal climate is going to be stable,” he said.

It’s not just robust policy that is important, Mr. Sawan said, but ensuring rules and regulations are non-partisan and that Canadians are engaged in an open discussion along the way.

“It’s accepting that this is not ‘I’m just going to get my way,’ but actually engaging in the appropriate compromise that is required to be able to have the majority of both the incumbent government and the opposing party working together.”

Canada has a golden opportunity to secure both its economic independence and sovereignty, he said, and he has confidence in the country’s ability to prosper in the energy infrastructure space.

And he hopes Shell can be integral to that future, given that it is the country’s largest integrated energy company.

“I think we have a role to play to support Canada’s ambitions and to bring Canadian resources both to Canadians as well as to the rest of the world.”

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Reducing greenhouse gas emissions is also a key part of the energy discussion, Mr. Sawan said.

For Shell, that means cutting production emissions in half by 2030 and reducing its customers’ emissions 15 to 20 per cent.

He pointed to LNG Canada’s design as one with the lowest carbon intensities in the world, as well as the company’s Quest carbon capture and storage (CCS) plant at the Scotford upgrader outside Edmonton.

“While many others are still debating the value of CCS, soon we will have sequestered some 10 million tonnes of CO2 in Quest as we celebrate a decade of its operation. And we’ve taken recently a fine investment decision on another CCS project here in Polaris,” he said, referring to the Polaris CCS plant at the Scotford refinery and chemicals complex. It is designed to capture roughly 650,000 tonnes of CO2 each year.

“It’s a very important element that our customers would be looking for as well, and something which I think will be important as they make their considerations for the energy they want to import.”

Mr. Sawan was in Canada this week at the juncture of various Shell milestones: 100 years in Canada, 40 years since the Scotford upgrader came online and a decade of running the attached Quest CCS plant.

Then there’s the opening of LNG Canada, which started exports to Asia in June. Mr. Sawan was travelling to Vancouver Friday to celebrate alongside government officials.

LNG Canada has been “an important proof point” for the Shell-led consortium to get a sense of how well it will follow through on its promises, Mr. Sawan said.

“So far, knock on wood, the team has been able to deliver within the timeline we had hoped for. And so far, the startup has been one of the stronger ones that we have seen in the industry.”

LNG Canada experienced technical problems as it ramped up production at the plant, with one tanker diverting away from the facility without the superchilled fuel.

Mr. Sawan acknowledged the hiccups. Surprises are inevitable with megaprojects such as LNG Canada, he said, and it takes time to fully stabilize. But the facility is now churning out a cargo every four days.