Bloomberg News

Shell, Kinder Morgan to Export Natural Gas From U.S.

January 28, 2013

Royal Dutch Shell Plc (RDSA) and Kinder Morgan Inc. (KMI:US) announced their intention to form a company to export liquefied natural gas from a site in Georgia, the latest of more than 20 export terminals seeking to ship U.S gas overseas.

The liquefaction project would be at an El Paso Pipeline Partners LP (EPB:US) import terminal on Elba Island, near Savannah, Georgia, according to a statement today. El Paso Pipeline, controlled by Houston-based Kinder Morgan, will own 51 percent of the entity and operate the facility. Shell, based in The Hague, will own 49 percent and buy all of its output.

LNG terminals built to import the fuel to the U.S. have begun seeking permission to export, as new production methods have boosted North American supply. There are more than 20 proposed LNG export terminals in the U.S. seeking permits allowing processing of about 31 billion cubic feet a day, according to the U.S. Department of Energy

“This announcement underscores how the abundance of natural gas in the U.S. is changing the energy landscape,” Marvin Odum, president of Shell’s U.S. subsidiary, said in the statement.

Elba Island already has permission from the Energy Department to ship gas to countries that have free-trade agreements with the U.S. That may allow exports to start faster than competing projects, Richard Wheatley, a spokesman for Kinder Morgan, said in an e-mail today.

$1 Billion

If both phases of the project are built it will cost “a little more than $1 billion,” Shell spokeswoman Kayla Macke wrote in an e-mail. Construction may start in the middle of this decade, Wheatley said. The project still needs permits from the U.S. Federal Energy Regulatory Commission.

Cheniere Energy Inc. (LNG:US)’s project at Sabine Pass already has regulatory permits and may begin exports in 2015. Exxon Mobil Corp. (XOM:US), the biggest U.S. energy company by market value, has applied for a permit to export gas from a site in Texas. Chevron Corp. (CVX:US), the second-biggest energy company, bought a 50 percent stake in the Kitimat export project in British Columbia in December.

The Elba Island terminal was built to import LNG and already has a connection to the U.S. gas pipeline network. Shell will use its movable modular liquefaction system, which is small enough to fit into cargo containers, to cool the gas to -260 Fahrenheit (-162 Celsius), allowing it to be loaded on tankers.

The project’s two phases will have a total export capacity of 350 million cubic feet a day, or about 16 percent of Cheniere’s planned capacity of 2.2 billion cubic feet a day.

Using Elba Island would give Shell the opportunity to ship gas to Europe or Brazil, said William Frohnhoefer, an analyst at BTIG LLC in New York who doesn’t cover Kinder Morgan.

“My guess is that amount could be easily absorbed into Royal Dutch Shell’s marketing portfolio,” he said in an interview. “They’ve got a lot of options.”

To contact the reporter on this story: Mike Lee in Dallas at mlee326@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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Companies Mentioned

  • KMI
    (Kinder Morgan Inc/DE)
    • $35.79 USD
    • 0.26
    • 0.73%
  • EPB
    (El Paso Pipeline Partners LP)
    • $35.26 USD
    • 0.29
    • 0.82%
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