Shell pulled out of a multibillion-dollar deal to renovate a liquefied natural gas terminal in Calcasieu Parish amid uncertain market conditions.
The company's Dallas-based partner, Energy Transfer, expects to continue the project but reduce its size. Energy Transfer expects to "evaluate various alternatives to advance the project," including finding another equity stake partner.
The move was prompted by Shell's decision to preserve cash during the coronavirus pandemic and low price of crude oil. Shell expects to continue to support Energy Transfer with the bidding process for contractors on the project.
Lake Charles LNG was initially built as a terminal to import cheaper liquefied natural gas when domestic prices were high more than a decade ago. The import terminal already has 9 billion cubic feet of storage, and its facility, which converts LNG back to natural gas, can handle 1.8 billion cubic feet of gas each day.
The company planned to add 16.4 million tons per year of LNG for export largely to customers in Europe and Asia. Energy Transfer opened an office in China last year to rustle up some customer contracts, and the business is still in discussion with potential customers. The project scope may shrink to only two liquefaction units, which could export up to 11 million tons per year, according to Energy Transfer.
Energy Transfer top executive was bullish on its potential to be completed.
“We continue to believe that Lake Charles is the most competitive and credible LNG project on the Gulf Coast,” said Tom Mason, president of LNG for Energy Transfer.
The project has already been granted an extension until December 2025 by the Federal Energy Regulatory Commission to be completed.
The companies expected commercial bids for engineering and construction by second-quarter 2020. A final investment decision had not been made. Lake Charles LNG is still waiting for an air permit from the Louisiana Department of Environmental Quality.
The project was estimated to create up to 5,000 construction jobs and 200 permanent full-time jobs once operational.