A truck drives past LNG Canada signage in Kitimat, B.C.Ben Nelms
The head of Shell Canada Ltd. says a prime contractor will be named next month for Shell-led LNG Canada as the co-owners take steps toward deciding whether to approve a $40-billion project to export liquefied natural gas from British Columbia.
"We're down to two shortlisted bidders and we'll be down to one by mid-April," Michael Crothers, president of Calgary-based Shell Canada, said in an interview on Thursday.
Two groups are in the running to serve as LNG Canada's prime contractor: TechnipFMC and KBR Inc.; and JGC Corp. and Fluor Canada Ltd.
The contract will be for what the industry calls engineering, procurement and construction (EPC), including plans to build an export terminal in Kitimat in northwest British Columbia.
"We're really pleased with these two shortlisted EPC bidders. They're working hard to answer our questions," Mr. Crothers said. "They're both very credible, they both have lots of LNG experience if you look at what they've done globally. We'll see who can give us the best combination of safety, execution, technical merit and commercial terms."
Once a prime contractor is chosen, the winning engineering team will produce "finished bid documents," which will contain the latest information on the project's economics.
"We hope to have a finished bid by the end of May, at which point we will have a lot more certainty on capital costs," said Mr. Crothers, who is also country chair for Shell Canada's parent company, Royal Dutch Shell PLC.
LNG Canada has estimated that it will cost up to $40-billion to construct the B.C. terminal and complete various infrastructure, including TransCanada Corp.'s proposed $4.7-billion Coastal GasLink pipeline from northeastern British Columbia to Kitimat.
Shell holds 50 per cent of LNG Canada. South Korea's Kogas and Japan's Mitsubishi Corp. each have a 15-per-cent stake, while PetroChina Co. Ltd. owns a 20-per-cent interest in the joint venture.
Industry analysts are expecting the four co-owners of the project to make a final investment decision (FID) by the end of 2018.
The co-owners have requested that LNG Canada staff finalize materials by the end of 2018 that would allow Shell and its three Asian partners to be in a position to take a deep dive into the project.
But Mr. Crothers emphasized that no target date has been set for deciding whether to forge ahead to the construction stage.
"We haven't made any firm decisions on our FID timeline at this point," he said during the interview in Vancouver, after he spoke at the Globe 2018 international conference on sustainable business. "All joint-venture partners will take that EPC information on the updated economics, and together we will confer and decide on the FID timeline. But we haven't done that."
Andy Calitz is the chief executive officer of LNG Canada, whose head office is based in Vancouver.
"Within LNG Canada, the joint-venture partners are part of a sub-committee, and each partner has representatives who look at the process for the selection of the EPC. That makes the joint venture stronger, and we give advice to Andy Calitz and his team," Mr. Crothers said.
LNG Canada has asked the federal Finance Department to exempt the B.C. project from anti-dumping tariffs on imports of fabricated industrial steel components, notably from China and South Korea. The Shell-led group wants supplies from China, saying it cannot afford to wait years to see whether Canadian fabricators can create a domestic industry in the Vancouver region to help construct large LNG modules.
"We believe this is a project that has enormous value for all of Canada, and domestic steel producers will still benefit from all the pipelines and upstream development," Mr. Crothers said. "If we have the disadvantage of not being able to bring in the large modules from the most efficient yards in the world, it's going to be very hard to make the case for competitiveness for our project."
Natural Resources Minister Jim Carr declined to comment on Thursday about whether Ottawa will grant an exemption to LNG Canada from the federal anti-dumping tariffs.
In general, Ottawa recognizes the potential in LNG exports, Mr. Carr said. "We'll look at various elements that would be the right ones for a positive decision. This is a very complex, competitive environment," he said during a news conference. "The message that I want to deliver is that we're supportive of growth in the industry."
On Wednesday, Mr. Calitz said he is optimistic about LNG Canada's prospects, despite delaying a final decision in 2016. "At the time, we said we wanted to be in construction in 2018," he said during a panel discussion at the Globe 2018 conference. "LNG Canada is currently preparing a set of final investment documents for our shareholders."
Brent Jang