Shell exits proposed Lake Charles LNG project

Energy Transfer will now take over the role of lead project developer and will continue the development of the project. Energy Transfer noted in a statement it will evaluate various alternatives to advance the project. The alternatives include bringing in one or more equity partners and reducing the size of the project from three trains (16.45 mtpa of LNG capacity) to two trains (11.0 mtpa).

“We continue to believe that Lake Charles is the most competitive and credible LNG project on the Gulf Coast,” said Tom Mason, Executive Vice President and President - LNG. “Having the ability to capitalize on our existing regasification infrastructure at Lake Charles provides a cost advantage over other proposed LNG projects on the Gulf Coast. The Lake Charles project also benefits from its unparalleled connectivity to Energy Transfer’s existing nationwide interstate and intrastate pipeline system that provides direct access to multiple natural gas basins in the U.S.”

Energy Transfer and Shell signed a Project Framework Agreement in March 2019. Under that agreement the two companies would share the cost of developing the project. Shell has committed to support Energy Transfer with this process through the receipt of commercial EPC bids in the second quarter of 2020. Shell will continue to support Energy Transfer during a transition period to facilitate Energy Transfer’s plans to continue the development of the project.

"This decision is consistent with the initiatives we announced last week to preserve cash and reinforce the resilience of our business," said Maarten Wetselaar, Director, Integrated Gas and New Energies, Shell. "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."

Shell announced last week the company is reducing its 2020 capital expenditure to $20 billion, or below, from a planned level of around $25 billion, in addition to an operating cost reduction of $3-4 billion over the next 12 months.