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    Shell, Partner Seek Lake Charles LNG Delay

Summary

Shell's $53bn acquisition of BG Group necessitated new project agreement

by: Dale Lunan

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Shell, Partner Seek Lake Charles LNG Delay

Anglo-Dutch major Shell and its partner, Energy Transfer (ET), have asked the US Federal Energy Regulatory Commission (Ferc) for a five-year delay on their proposed 16.45mn mt/yr Lake Charles LNG export project. The request was filed August 30.

Lake Charles LNG – a brownfield conversion of an existing LNG import and regasification complex and an associated natural gas pipeline – was initially a wholly-owned project of Energy Transfer, with BG Group subscribed for 100% of the LNG output. Following Shell’s $53bn acquisition of BG Group in 2015, a new project agreement was negotiated and finalised in April 2019, with Shell and Energy Transfer each taking a 50% equity stake in the liquefaction and export facilities and subscribing for 50% of the export capacity of the terminal.

“Under the new project framework agreement, ET and Shell have established a detailed process for the development of the project which includes milestones that are expected to result in the project sponsors reaching final investment decision (FID) as early as the end of 2020, subject to specified conditions precedent,” Lake Charles LNG said in its request to Ferc.

In April this year, the partners issued an invitation to tender to prospective engineering, procurement and construction (EPC) bidders, one of the milestones set out in the project agreement, and in the second quarter this year executed contracts with LNG EPC companies to verify the project’s existing front-end engineering design.

The partners, the letter said, have already incurred some $300mn in development costs and anticipate incurring an additional $150mn in development costs prior to FID.

“The project remains an active, fully-supported project with no changes proposed to the scope or design that the commission reviewed and approved in [2015],” the extension request says. “An extension of the deadlines for the completion of the construction of the pipeline facilities and the LNG export terminal facilities to December 2025 is necessary to bring the project to completion.”