Energy Transfer, Shell sign agreement for Lake Charles LNG export facility

(iStock) Calcasieu Parish

Texas pipeline operator Energy Transfer and Dutch oil giant Shell have moved closer to making a final investment decision on developing a large-scale LNG export facility in Lake Charles.

In a joint statement issued Monday, the two companies announced that they had signed a project framework agreement and that plan to issue an invitation to tender for engineering, procurement and contracting companies to start bidding on the project.

“We are pleased to be moving forward with Shell in progressing this major LNG export project,” Lake Charles LNG President Tom Mason said in a statement. “We believe the combination of our assets and Shell’s LNG experience will create a platform for exporting natural gas from the U.S. Gulf Coast to the global marketplace that is unmatched.”

This agreement defines the commercial terms by which the two companies will work toward delivering an LNG export facility on the U.S. Gulf Coast. Shell will act as the project lead prior to the companies reaching a final investment decision, and if sanctioned, as construction manager and operator of the facility. Energy Transfer will act as site manager and project coordinator. The statement issued Monday says the decision to invest and proceed with construction of the project will be subject to both companies’ assessment of the outcome of the EPC bidding process, overall project competitiveness and global LNG market conditions.

Energy Transfer originally developed the facility as an LNG import terminal in 2006 but got permission from Federal Energy Regulatory Commission to build an export terminal at the site in 2015 shortly after the shale revolution created a surplus of natural gas in the United States.

Shell entered into a 50-50 joint venture with Energy Transfer in 2016 to develop a liquefaction plant that can produce up to 16.45 million metric tons of LNG per year. A final investment decision has been pending for nearly the three years. The project framework agreement and bidding documents are considered a step forward.

“Lake Charles presents a material, competitive liquefaction project with the potential to provide Shell with an operated LNG export position on the U.S. Gulf Coast by the time global supply is expected to tighten in the mid-2020’s,” Shell Vice President Frederic Phipps said in a statement.

If built, the export terminal project is estimated to create up to 5,000 local jobs during construction and 200 full-time positions when fully operational.