Penn West in talks with Japanese to export liquefied shale gas from BC

Penn West Exploration is in talks with a Japanese consortium that includes Mitsubishi Corp. to jointly build a plant on Canada's west coast to export shale gas to Japan. It would be the first time shale gas produced in Canada was exported to Japan.

Besides Mitsubishi, the consortium comprises the Tokyo Gas Co., Osaka Gas Co., Chubu Electric Power Co. and Japan Oil, Gas and Metals National Corporation.

The aim is to produce 10 million tons of shale gas, more than 10 percent of Japan's annual imports of liquefied natural gas. This will help Japan satisfy its surging demand for LNG, an alternative to nuclear energy in that country.

The shale gas will be extracted in inland British Columbia and transported 1,000 kilometres to the coast by a pipeline. Penn West holds a 50 per cent share in the gas field, while the Japanese consortium holds 45 per cent. The remaining 5 per cent is owned by the Korea Gas Corporation. The gas will be liquefied in the plant on the coast before being shipped to Japan.

The project would be almost as large as the Sakhalin-2 oil and gas project already underway between Japan and Russia. The cost is estimated at over 1 trillion yen ($11.87 billion). They aim to begin shipping the LNG in the late 2010s.