Middle East conflict spurs LNG Canada to increase exports

Shell-operated LNG has stepped up production and cargoes exports as buyers in Asia scramble for supply in the midst of the conflict in the Middle East, Reuters reported on March 10 citing data from the London Stock Exchange Group (LSEG).

Canada’s flagship project shipped abroad five cargoes by March 11, which was already more than half its monthly total for February.

The destination for all the cargoes has been Asia, with South Korea and Japan buying two each and one cargo being sent to the Philippines. LNG Canada primarily targets buyers in East Asia benefiting from its direct shipping path of just eight to nine days from western British Columbia to Tokyo.

According to LSEG data, LNG Canada is operating near its full capacity of 14mn tonnes per year (tpy), a welcome sign for the facility. In its first several months of operation, the plant encountered problems disrupting operations forcing cargoes to be cancelled, with Train 1 spending time offline or operating at less than half of capacity.

On a monthly schedule, LNG Canada can ship almost 1.2mn tonnes. LSEG data reveals that the plant loaded over 400,000 tonnes in the first 10 days of March.

With the Strait of Hormuz closed with Iran threatening to attack any vessels attempting to transit, Qatar and the United Arab Emirates are unable to export LNG cargoes, eliminating 20% of global supply. Qatar, which is the second-biggest LNG exporter in the world behind only the US, declared force majeure on deliveries earlier in March.

For LNG Canada the skyrocketing gas prices offer a terrific opportunity to make a cash windfall.

Despite much optimism surrounding Canada’s potential to emerge from being a sleeping giant in the LNG sector, both Shell and Japan’s Mitsubishi were rumoured in January to be exploring options to unload parts of their stakes in LNG Canada.