Shell PLC’s LNG Canada export project in British Columbia plans to start building its proposed second phase with natural gas-powered turbines and switch to electricity as more renewable power becomes available, a top executive said, a decision that means the expansion project will initially generate high greenhouse gas emissions.
LNG Canada, in which Japan’s Mitsubishi Corp owns a 15% stake, is set to be Canada’s first liquefied natural gas (LNG) export terminal. The first phase is expected begin shipments around 2025.
With global demand for natural gas from sources other than Russia accelerating after its invasion of Ukraine last year, LNG Canada is weighing whether to build by 2030 a second phase to double annual capacity to 28 million tonnes.
LNG Canada now plans to initially build Phase 2 with natural gas-powered turbines and switch to electric motors as more power becomes available, pending a final investment decision, CEO Jason Klein told Reuters on Friday.
LNG Canada has previously described this approach as only one of the options it was considering.
The company’s move to only gradually switch to renewable electricity risks means the Phase 2 project would produce initially high emissions that would run up against ambitious emissions reduction goals set by the British Columbia and federal governments.
Running the turbines using B.C.’s hydro electricity to cool the gas to liquid for shipping would limit emissions, but requires hundreds of kilometers of new transmission lines to reach the province’s remote northwest coast.
“We can’t do an immediate and wholesale electrification of the plant and the pipeline. It’s not possible today because the transmission infrastructure just isn’t there,” Klein said, adding that LNG Canada is discussing with both governments and utility BC Hydro when lines may be in place.
“If the power was there today it would be a pretty straightforward decision.”
LNG Canada’s dilemma illustrates the practical challenges of a global push to electrify buildings and vehicles to curb climate-warming emissions. The move requires the world’s grid to generate significantly more power and build infrastructure to deliver it.
Klein said LNG Canada had not directly asked for financial assistance from either government to build transmission lines and electrify Phase 2, and is still assessing the project’s economics.
“I wouldn’t expect to be able to attract capital to a project that’s not competitive,” Klein said.
LNG Canada has full environmental permits from both governments to use natural gas turbines for Phase 2, making it unclear what leverage governments have to force electrification.
Government cooperation is critical to constructing transmission lines, however.
“It would be difficult to make an investment on this scale without some level of alignment and the support of host governments,” Klein said.