Shell and Mitsubishi considering selling stakes in LNG Canada

Shell and Japan’s Mitsubishi are exploring options to unload parts of their stakes in LNG Canada, sources with knowledge on the matter told Reuters on January 16.

The world's largest LNG trader Shell is the operator of the project and holds a 40% interest. It has reportedly been working with financial services group Rothschild & Co to determine interest from possible buyers.

It is believed that the London-headquartered firm could be willing to unload up to 75% of its holdings.

Meanwhile, Mitsubishi has hired RBC Capital Markets to help it gauge interest and weigh its options, sources told Reuters. Mitsubishi holds a 15% stake in the project.

Other partners in the project include Malaysia’s Petronas with a 25% stake, PetroChina with a 15% interest and Korea’s KOGAS, which holds a 5% stake.

Canada’s flagship project shipped its first cargo of the super-chilled fuel to Japan in late June. However, just one month later, the facility began encountering problems disrupting operations and forcing at least one cargo to be canceled.

Train 1 at the facility has largely been operating at less than half of its 6.5mn tonnes per year (tpy) capacity. In November, the facility’s second liquefaction unit entered production. If operating at full capacity, the plant could produce up to 13mn tpy of the super-cooled gas.

Despite the operational struggles at the plant, the facility’s long-term outlook still remains largely rosy. The project in Kitimat, western British Columbia boasts an ideal geographical location that enables a speedy delivery of cargoes to energy-hungry Japan and South Korea that can be completed in just eight to nine days.

Low feedstock costs are also an added bonus for the project given that the Canadian natural gas prices are usually trading at a discount in comparison to the US Henry Hub benchmark.