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Market Conditions Take Shell out of Lake Charles LNG Project

Shell became the latest company to drop out of a major North American LNG project. The oil major advised Energy Transfer that it will not proceed with an equity investment on the Lake Charles LNG export project due to current market conditions. The project was a 50/50 venture between the two companies.

As a result, Energy Transfer will take over development of the Lake Charles LNG project. Energy Transfer and Shell signed a project framework agreement in March 2019, under which the two companies agreed to share the cost of developing the project. Since then, the companies have jointly undertaken the engineering, procurement, and construction (EPC) bidding process. In September, Shell asked US regulators for an extension to complete the LNG project to 2025

Energy Transfer said it will evaluate various alternatives to advance the project, including the possibility of 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 mtpa).

“We continue to believe that Lake Charles is the most competitive and credible LNG project on the gulf coast,” said Tom Mason, Energy Transfer’s executive vice president and president of LNG. “We remain in discussions with several significant LNG buyers from Europe and Asia regarding LNG offtake arrangements as well as, in some cases, a potential equity investment in the project.”

Mason added that in light of the advanced state of the development of the project, Energy Transfer remains focused on pursuing this project on a disciplined, cost-efficient basis and the decision to make a final investment decision will be dependent on market conditions and capital expenditure considerations.

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