Lng Canada Offtake Agreements
April 10, 2021

The commercial success of the much-delayed $40 billion LNG-Canada operation is increasingly certain after Japan`s JERA Co Inc signed a 15-year Trade Agreement (HoA) for liquefied natural gas production from April 2024, up to Tpa 1.2 million. LNG Canada`s other clients are supply companies Tokyo Gas, Toho Gas and Korea Gas, as well as global trading house Vitol. Vitol joins Asian suppliers Tokyo Gas, Toho Gas and Korea Gas Corp (Kogas) as buyers and commits to go down together about 2.4 mtpa. While nearly 20 LNG facilities have been proposed for the north coast of British Columbia, only the LNG Canada project has been given the green light to build by investors. Wang said Woodfibre LNG Ltd., a smaller facility planned for the south coast of the province, was the next project most likely to make progress. A proposal by a number of Canadian manufacturers to combine to build their own plant has an advantage, but the group would require strong take-take agreements before this project can be launched. These long-term agreements normally support project financing and are essential before a final investment decision is made. Other Asian companies, including Tokyo Gas, Toho Gas and Korea Gas Corp, have already signed contracts with LNG Canada. With Vitol, buyers have committed to offtake about 2.4 mtpa collectively.

Additional pipeline capacity and natural gas supplies could prompt LNG Canada Development Inc. to introduce more trains into the plant before it is completed, Dulles Wang, Wood Mackenzie`s director of U.S. gas research, said at an online seminar. While TransCanada Corp. will have excess capacity in its coastal gas pipeline and plenty of fuel in the Montney and Duvernay slate fertiles, the project will depend on the certainty of the facility`s launch agreements, Wang said. LNG Canada is about five years away from the delivery of its first LNG cargo. LNG Canada`s structure, which includes a number of partners such as Malaysian Petrolian Nasional Bhd., Korea Gas Corp., PetroChina Co. Ltd. and Japan`s Mitsubishi Corp., requires each participant to procure, transport and market their own volumes. All companies secured supply in British Columbia either through agreements with manufacturers or by local subsidiaries.

Shell and Korea Gas have hinted that they need to source gas from outside sources to complete the second phase of the project, Wang said. JerA`s latest HoA is to purchase up to 16 LNG shipments per year from LNG Canada Venture, and the Japanese buyer said the deal “will contribute to a stable and economical LNG supply in the future.” The objective clause of the acquisition agreement with Royal Dutch Shell is in line with the Japan Fair Trade Commission`s investigation into LNG trade published in June 2017, and JERA said it expected this to adequately address the uncertainty of LNG supply and demand and to optimize its global gas portfolio.

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