January 9, 2024 [Reuters]- Global gas giant Shell (SHEL.L) has agreed to buy two million metric tons of liquefied natural gas (LNG) per year from Ksi Lisims LNG, partners in the proposed Canadian project said on Monday.

British Columbia’s Pacific coast is close to Canada’s vast Montney shale field and has a relatively short shipping distance to Asian markets.

Natural gas is in high demand from Asia to replace coal, which creates higher emissions. But an expected ramp-up in global LNG production risks creating a supply glut after 2025, the International Energy Agency said in October.

Ksi Lisims would be one of Canada’s first LNG export facilities if built and its second-largest, but it has not yet passed all regulatory hurdles.

Shell is looking to increase its LNG volumes by 20% to 30% by the end of the decade and leads the LNG Canada project under construction in British Columbia (B.C.). That project would produce 14 million metric tons of LNG a year with shipments beginning in 2025.

Ksi Lisims, a co-development of the Nisga’a Nation, Rockies LNG Partnership and Western LNG, would produce 12 million metric tons of LNG annually from two floating LNG production and storage facilities. Exports may start in late 2028.

Western CEO Davis Thames said the project expects to announce more sales agreements in the coming months but has not decided how much of its total production it will commit to contracts.

The facilities would run on hydro-generated electricity to become net-zero emissions by 2030 as required by the B.C. government. That plan depends on utility BC Hydro expanding transmission lines to serve LNG and mining projects in northwest B.C.

Ksi Lisims applied to the B.C. government for an environmental certificate in October and may receive a decision by year-end, Thames said.

Rockies LNG, another partner, is a group of natural gas producers including Tourmaline (TOU.TO) and Ovintiv (OVV.N).

LNG Canada’s first phase is expected to open mid-decade and the company is considering sanctioning a second phase.

Woodfibre LNG, owned by Pacific Energy and Enbridge (ENB.TO) is the other B.C. export facility entering construction. Woodfibre, which will produce 2.1 million tons annually, has agreements to sell most of its LNG to BP Plc (BP.L).

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