Shell top bidder on LNG capacity at El Paso's Elba Island facility

By the OGJ Online Staff

HOUSTON, Jan.3 -- Shell Gas & Power, a unit of Royal Dutch/Shell Group, acquired rights to all the additional storage capacity El Paso Corp. is planning at the Elba Island liquefied natural gas (LNG) terminal near Savannah, Ga.

Shell offered the top bid in an auction among four bidders for 3.3 bcf of new storage capacity -- an 80% increase on existing capacity -- at the terminal. The gas in storage can be transported from the terminal facility at a rate of 360 MMcfd. The term of the LNG terminal contract is for 30 years. Financial terms were not released.

El Paso received authorization from the Federal Energy Regulatory Commission to begin receiving LNG shipments at the Elba Island facility Dec. 1, 2001. The expansion, expected to be in operation in 2005, will cost about $145 million, El Paso said. Natural gas markets in Georgia, Florida, and South Carolina are served by the facility.

Shell also owns a 25.6% stake in an LNG project in Nigeria and is developing a project in Venezuela. Nigerian Liquefied Natural Gas Ltd., owned by Nigeria National Petroleum Corp., TotalFinaElf SA, Agip International BV, and Shell, has two LNG trains in operation with capacity of 5.78 million tonnes/year, said Mike McGarry, a Shell spokesman. A third train is under construction that will increase the capacity by 50% and a fourth train is "being looked at," he said.

"We have other LNG projects (under development) besides Nigeria in West Africa," said John Hritcko, vice president Shell NA LNG Inc. "There is also the project on the drawing board for years in Venezuela with other partners."

Shell is looking to the US to receive shipments of LNG from its existing facilities and those under development, he said. "The market is extremely strong long term in the US," he said. "We are focusing more on the import capacity of LNG into the US now."

Market research firm Emerging Markets Online, Houston, predicted in a recent study the market for LNG will double over the next 10 years. The research group also said in the November report that the winners in the LNG industry will be those taking a "long-term" view.

LNG imports represent about 5% of overall US gas imports. During the third quarter of 2001, eight importers brought in 28 cargoes from six countries, totaling 66 bcf, down from 32 cargoes totaling 73.6 bcf in the third quarter of 2000, according to the US Department of Energy Office of Natural Gas & Petroleum Import & Export Activities.

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