Shell, Kinder Morgan to Export LNG from the United States

Shell, Kinder Morgan to Export LNG from the United States
Written by:
Tsveta van Son
29th January 2013

On 28 January 2013, Royal Dutch Shell (LON:RDSA, LON:RDSB, NYSE:RDS.A, NYSE:RDSA.B) and Kinder Morgan (NYSE:KMI) announced that they had reached agreement to collaborate in exporting liquefied natural gas (LNG) from a site in Georgia. The news lifted the stock of both companies in New York trading, with Shell closing 0.18 percent higher at $71.59 and Kinder Morgan gaining 0.75 percent to close at $37.53.

**New LNG Export Company**
The new joint venture company will develop a natural gas liquefaction plant in two phases at an El Paso Pipeline Partners LP (NYSE:EPB) import terminal on Elba Island in Georgia. Bloomberg reported that El Paso Pipeline, which is controlled by Kinder Morgan, will own 51 percent of the entity and operate the facility. Shell will own the remaining 49 percent and buy all of the facility’s output.

Bloomberg quoted Shell spokeswoman Kayla Macke as noting that if both phases of the project are built, the cost will be just over $1 billion (£636 million). As noted in Shell’s press release, the total project is expected to have liquefaction capacity of approximately 2.5 million tonnes of LNG per year or 350 million cubic feet of gas per day.
**Elba Island Terminal**

Elba Island, which is located near the Port of Savannah in Georgia, already has permission from the US Department of Energy to ship gas to countries which have free-trade agreements with the US. Bloomberg quoted Kinder Morgan spokesman Richard Wheatley as saying that the existing permission might allow exports to start faster than competing projects. In addition, the Elba Island terminal, which was built to import LNG, already has a connection to the US gas pipeline network.

Bloomberg quoted William Frohnhoefer, an analyst at BTIG LLC, as pointing out that Elba Island will give Shell the opportunity to ship gas to Europe or Brazil. “My guess is that amount could be easily absorbed into Royal Dutch Shell’s marketing portfolio.”
In its press release, Shell also noted that in August 2012, the terminal submitted a filing with the Energy Department seeking approval to export up to four million tonnes per year of LNG to countries which do not have free trade agreements with the US.

!m[Both Kinder Morgan And Shell Close Higher In New York Trading](/uploads/story/1298/thumbs/pic1_inline.png)
**Natural Gas Abundance**
The new LNG export project is yet another indication of US natural gas potential. “This announcement underscores how the abundance of natural gas in the US is changing the energy landscape,” noted Marvin Odum, President of Shell’s US subsidiary in the press release.
Reuters reported that a number of other companies, including Texas-based oil and gas explorer Exxon Mobile (NYSE:XOM), have already lined up to get permission to sell the cheap North American natural gas overseas, where it can fetch much higher prices. Bloomberg reported that another US energy giant, Chevron Corp (NYSE:CVX), in December 2012 bought a 50 percent stake in the Kitimat LNG export project in British Columbia.
**Shell’s share price as of 12:28 p.m. GMT on 29 January 2013 was 0.35 percent up at 2,289.00p in London. It closed 0.18 percent higher at $71.59 in New York on January 28. Kinder Morgan’s share price closed 0.75 percent higher at $37.53.**

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