Shell (RDS.A) To Decide On LNG Canada 2nd Phase By 2025

Royal Dutch Shell (LON:RDSa) plc RDS.A and its partners in the major LNG Canada project intend to decide within 2025 whether to boost its capacity via doubling it, per Reuters. Shell is building the LNG export terminal on the west coast of the country. The facility is located in Kitimat, British Columbia.

The Canadian energy sector, which used to be a booming market, has not witnessed any major milestones over the past few years. Industry downturn, coupled with infrastructure deficiencies and U.S. shale revolution had hit the country hard. With the cancellation of major projects like Northern Gateway, Pacific NorthWest and Energy East, along with uncertainties associated with the existing ones, things had been quite dispiriting for investors in the Canadian oil energy space. The $31-billion LNG Canada project, thus, brought a ray of hope to the country’s energy industry’s plight.

Currently, production capacity at the facility is expected at 14 million tons per annum from the first two trains, while first export is anticipated to occur in 2025. The second phase is expected to add two more trains and increase its capacity to 28 million tons. A final investment decision on the second phase is expected before the first phase comes online. Notably, the facility has the potential to include two more trains after the second phase.

The project, wherein Shell actively worked its way to lower costs and take advantage of the tax breaks announced by the government of British Columbia, is expected to cash in on the improving energy landscape and booming global demand for liquefied natural gas, especially in the growing markets of Asia. Moreover, the exporting facility is strategically situated in a prime location, which provides a shipping route that is around 50% shorter than the U.S. Gulf of Mexico, while avoiding the Panama Canal. The project will liquify and carry the gas from Montney and other fields to the Asian markets.

Shell is currently the largest shareholder of the LNG Canada project with 40% stake and PETRONAS is the second-largest partner in the project with 25% interest. PetroChina Company Limited (NYSE:PTR) and Mitsubishi own 15% stake, each. The remaining 5% interest is held by KOGAS.

Price Performance

Headquartered in The Hague, Netherlands, Shell’s stock has gained 2.5% in the past year compared with 4.6% collective growth of the industry it belongs to.

Zacks Rank and Stocks to Consider

Currently, Shell carries a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better-ranked stocks as cited below:

Buenos Aires, Argentina-based YPF Sociedad Anonima (NYSE:YPF) is an integrated energy company. It delivered average positive earnings surprise of 210.4% in the trailing four quarters. The stock currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Austin, TX-based Jones Energy, Inc. (OTC:JONE) is an exploration and production company. For first-quarter 2019, its bottom line is estimated to grow 20.6% year over year. The company currently holds a Zacks Rank #2.

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