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Royal Business for Royal Dutch: Chevron Corporation (CVX)

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Chevron (CVX) Set to Win Lithuanian Shale Gas LicenseCan Canada lose an opportunity that will guarantee a high amount of revenue for the country, along with new jobs that will boost the economy? It’s a win-win situation that no country can afford to lose. And Canada hasn’t, as proven by the license that Canada has awarded to Shell -A) -B) and its partners to export LNG from a facility planned on Canada’s West Coast.

Grasping the Opportunity:

The advances in technologies like horizontal drilling and hydraulic fracturing led to a supply glut of natural gas from shale fields. At a point when North American countries were thinking about importing a cleaner form of energy like natural gas, these new techniques completely turned the scenario upside down. Now in an effort to make an effective use of the oversupply of gas, North American companies are exporting gas to other countries where demand is high.

And the latest company to join the league of LNG exporters is the Shell-led consortium LNG Canada. The group has been awarded a license for 25 years with an annual export of 24 million tonnes of gas. The export terminal will be built on the West Coast at British Columbia and will provide Shell the competency to serve the markets of Japan and China, countries with high demand for cleaner energy like natural gas. LNG Canada has chosen TransCanada Corporation (USA) (NYSE:TRP) to build a 700 kilometer pipeline connecting their gas fields to the LNG terminal at Kitimat.

A lot more companies have applied for the license to export natural gas to Asian and European countries, and Shell is not the first one to get a license. Kitimat LNG, a group led by Apache Corporation (NYSE:APA), Chevron Corporation (NYSE:CVX), and BC Douglas Channel are two other projects that have already received a license to export LNG from British Columbia. The Kitimat LNG project got a boost when Chevron acquired interest in the project, as it adds to the credibility of the group. With a big player like Chevron holding a 50% interest in the project, buyers will feel more comfortable to enter into supply contracts for long terms with the group. This will guarantee that the group has supply contracts for years to come and earn a premium on the price by supplying to the LNG hungry Asian countries.

And the list doesn’t end here.  Many oil and natural gas companies have also applied to US for exporting LNG.

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