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Sources say Shell-led LNG Canada is facing problems when it ramps up its production.

Shell-led LNG Canada has been experiencing technical difficulties as it ramps production up at its liquefied gas plant in Kitimat. One LNG tanker was diverted away from the plant without superchilled fuel, according to data provided by LSEG and four sources.

The facility is the first major LNG-export facility on the West Coast of North America and Canada, providing access to Asia, which is the largest LNG market in the world.

When fully operational, the facility will convert approximately 2 billion cubic foot of gas each day (bcfd), which is what market participants hoped would boost Canadian natural gas pricing. Western Canadian natural gas remains depressed due to a persistent glut of supply that hasn't yet been reduced by new demand from LNG Canada, which started on July 1.

According to LSEG, the daily spot price for the Alberta Energy Company storage hub was $0.22 per mmBtu, compared with the U.S. Henry Hub reference price of $3.12.

Two of the sources stated that LNG Canada's first plant (also called a train) is operating at less half its capacity.

According to two industry sources, the facility's Train 1 experienced technical problems with a gas-turbine and a Refrigerant Production Unit.

All sources spoke under condition of anonymity as the information was not publicly available.

A spokesperson for LNG Canada responded that a facility of the size and scope of the joint venture may experience operational setbacks while it ramps production up and stabilizes. Shell diverted an empty LNG tanker to Peru while other tanks remained close to the facility. This was shown by LSEG ship tracker data. According to LSEG data, Ferrol Knutsen is a 170.520 cubic meters LNG vessel that was heading to Kitimat but changed direction and now is off the coasts of California, on its way towards Peru.

LNG Canada is a joint-venture between Shell, Malaysian Petronas and PetroChina as well as Japan's Mitsubishi Corp.

According to statements from the company, when fully operational LNG Canada will be able to export 14,000,000 metric tons per year (mtpa). The facility has so far exported four cargoes. Its first shipment was on July 1. A spokesperson for LNG Canada said that another shipment will be expected in the next few days. As the plant moves from its early stages of operation to a regular shipping schedule, the pace of exports will increase.

The spokesperson said that "in regular operations, we expect to load one export cargo every two days from our facility."

Tom Purdie is a senior LNG analyst with Energy Aspects. He said that any decrease in JKM-TTF prices above two cargoes a month would be bullish. This refers to the Asian and European benchmarks.

Purdie stated that "further Canadian supply losss would tighten up the Pacific market and compound the impact of ongoing Australian shortages and robust Asian demand".

(source: Reuters)