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Shell pulls out of U.S. Lake Charles LNG project, Energy Transfer delays FID

Mar 30th, 2020
by John Donovan.

UPDATE 2-Shell pulls out of U.S. Lake Charles LNG project, Energy Transfer delays FID

Ron Bousso, Shradha Singh: MARCH 30, 2020 

* Energy Transfer delays FID from late 2020 to early 2021

* Shell relinquishes 50% stake amid spending cuts

* Decision comes after collapse in oil prices 

By Ron Bousso and Shradha Singh

March 30 (Reuters) – Royal Dutch Shell Plc pulled out of a major liquefied natural gas (LNG) export plant under development in Louisiana following the recent crash in oil and natural gas prices that has forced the company to make deep spending cuts.

Energy Transfer LP, which was developing the project with Shell, said it remains focused on the commercial development of Lake Charles and is working toward making an early 2021 final investment decision (FID) to build the plant.

Previously, the company had said it could make that FID in late 2020, which would allow the project to enter service in the second half of 2025.

Shell said that “given current market conditions” it will not proceed with its 50-50 Lake Charles venture with Energy Transfer.

The project, one of a number of large LNG facilities planned in the wake of the U.S. shale boom over the last decade, envisaged converting Energy Transfer’s existing import and regasification facility into a multi-train, 16.45 million tonnes per year (MTPA) export facility.

“Whilst we continue to believe in the long-term viability and advantages of the project, the time is not right for Shell to invest,” Maarten Wetselaar, head of Shell’s integrated gas and new energies division, said in a statement.

The project had faced difficulties before the 60% collapse in oil prices since January due to the coronavirus and a price war between top crude producers Russia and Saudi Arabia.

Last November, the companies asked U.S. regulators to extend the time to complete the project to 2025 due to a weaker outlook for gas prices as a result of new capacity coming online and surging U.S. output.

Shell said last week that it will cut spending by $5 billion to below $20 billion in 2020 and suspended its vast $25 billion share buyback plan in an effort to weather the oil price collapse.

Other LNG projects also face delays.

Exxon Mobil Corp is likely to delay the greenlighting of its $30 billion LNG project in Mozambique, six sources told Reuters in March.

Qatar has also delayed choosing Western partners for the world’s largest LNG project by several months after surprising the industry with a big expansion plan despite a collapse in global gas prices, four sources said in February.

Reporting by Scott DiSavino in New York and Shradha Singh in Bengaluru; Editing by Susan Fenton and Lisa Shumaker

SOURCE

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Posted in: Exxon Mobil, Gas, LNG, Reuters, Royal Dutch Shell Plc, Shell, United States.
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