Dallas pipeline operator Energy Transfer will proceed with the proposed Lake Charles LNG export terminal alone after European oil major Shell has decided to exit the multibillion project.
Source: Houston Chronicle
Shell announced Monday that company will continue to support Energy Transfer with the bidding process for a general contractor but will then exit the project in a phased handover. The announcement comes a week after Shell cut $5 billion from its 2020 capital expenditure budget amid a major oil price downturn attributed to the price war between Russia and Saudi Arabia and lower energy demand due to the coronavirus pandemic.
“This decision is consistent with the initiatives we announced last week to preserve cash and reinforce the resilience of our business,” Shell Integrated Gas and New Energies Director Maarten Wetselaar said. “Whilst we continue to believe in the long-term viability and advantages of the project, the time is not right for Shell to invest. Through the transition, we will work closely with Energy Transfer.”
Lake Charles LNG was originally developed as an import terminal, but that changed when the shale revolution resulted in record production natural gas production in the United States. Under a federal permit issued in December 2015, the proposed export terminal is authorized to produce 16.45 million metric tons of LNG year.
Negotiations with Shell, one of the top producers and traders of LNG in the world, delayed the project for years. Energy Transfer and Shell ultimately signed a March 2019 deal to split costs and responsibilities for the project. In a statement, Energy Transfer Executive Vice President Tom Mason said the Dallas pipeline operator remains committed to the project and will take over as lead developer.
“We remain in discussions with several significant LNG buyers from Europe and Asia regarding LNG offtake arrangements as well as, in some cases, a potential equity investment in the project,” Mason said. “In light of the advanced state of the development of the project, we remain focused on pursuing this project on a disciplined, cost efficient basis and, ultimately, the decision to make a final investment decision will be dependent on market conditions and capital expenditure considerations.”
