RDSA Shell Plc

By Ryan Dezember and Inyoung Hwang 

Shortly after Ben van Beurden took over as chief executive of Royal Dutch Shell PLC, he bet the company on natural gas, with a roughly $50 billion takeover of a rival focused on shipping the fuel around the globe. Now he is preparing to double down.

Mr. van Beurden said Tuesday that a consortium led by the Anglo-Dutch energy giant will decide before year-end whether to move forward with a $30 billion, liquefied-natural-gas export terminal in western Canada.

"We postponed the decision previously when the project wasn't ready in terms of economic fortunes," he told The Wall Street Journal on the sidelines of the Oil and Gas Climate Initiative's meeting in New York. "But there are only so many times you can postpone and recycle and revisit. The moment of truth will come in the next few months."

The export terminal is intended to gather cheap natural gas extracted from remote parts of western Canada, chill it to liquid form known as LNG and load the fuel into special tankers to transport it to Asia where it fetches much higher prices. Shell holds the largest stake in the project alongside partners PetroChina, Mitsubishi Corp. of Japan, Korea Gas Corp. and Malaysia's Petroliam Nasional Bhd.

The Canadian LNG project could take five years to construct should the consortium move forward with its final investment decision, Mr. van Beurden said.

Since taking the helm at Shell at the start of 2014, Mr. van Beurden has pushed the company toward natural gas in a shift from its traditional oil business. One of Mr. van Beurden's early moves as CEO was to acquire rival BG Group PLC and its global LNG business. The acquisition, made at the depths of an energy price crash in early 2016, made Shell the world's dominant competitor in LNG, and gave it a big position in the nascent business of delivering U.S. shale gas overseas.

Shell took the initial LNG cargo in March from Dominion Energy Inc.'s Cove Point LNG export terminal on Chesapeake Bay, and it has also been a shipper of shale gas from Cheniere Energy Inc.'s Louisiana facility.

"Gas has more running room, particularly if you take into account what the world needs in terms of additional LNG demand as well as the decarbonization of the energy system," said Mr. van Beurden, who spent roughly 10 years working in Shell's LNG business as well as in its chemicals and refining businesses before becoming CEO.

China's retaliatory 10% tariff on U.S. LNG, part of the country's trade dispute with the Trump administration, doesn't necessarily improve the decadeslong financial outlook for Canada LNG, but the move could help build favor for the project among its investors, Mr. van Beurden said.

"These tariffs are not going to stay forever and you make an investment decision and the market will take a view of this project over multiple decades," he said. "In terms of sentiment, it may nudge it a little bit in a certain direction."

President Trump's trade wars are having unintended consequences on another of Shell's gas plays, however. Steel bound for a multibillion-dollar petrochemical plant that Shell is building outside of Pittsburgh was held by U.S. Customs and Border Protection at a California port in June after quotas for Brazilian steel were filled. Shell only received the steel recently after getting Mr. Trump to sign a presidential proclamation ordering the shipment released.

The Pennsylvania chemical complex, which converts ethane extracted from the nearby Marcellus and Utica shales into polyethylene, a component of plastics, is ahead of schedule and within budget, Mr. van Beurden said. But there could be lengthy delays and added costs if steel parts ordered years ago are unable to be delivered.

"It's not fatal but it is something that can really disrupt the flow of construction and the continuity of employment and it can bring significant costs in the project itself if it is not managed properly," he said.

(END) Dow Jones Newswires

September 24, 2018 17:23 ET (21:23 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.