(Updates with additional background)
--Shell, Kinder Morgan unit partner up to export 350 million
cubic feet of gas per day from Georgia terminal
--Some government permits, final financial approvals pending
--Move adds to efforts to capitalize on U.S. cheap natural
gas
By Angel Gonzalez
HOUSTON--Royal Dutch Shell PLC (RDSB.LN) has struck a deal with
a unit of U.S. pipeline giant Kinder Morgan to export liquefied
natural gas from an existing import terminal near Savannah, Ga.,
the companies said Monday.
The deal adds to energy-sector efforts to capitalize on North
America's newly found abundance of natural gas from shale, and
comes in the wake of a recent report commissioned by the U.S.
Department of Energy that came out in favor of LNG exports.
Exxon Mobil Corp. (XOM) last year announced plans to turn an
import terminal in Texas into a facility that can also export, and
Chevron Corp. (CVX) last month partnered with Apache Corp. (APA) to
liquefy and export natural gas out of western Canada. Anglo-Dutch
giant Shell is also working on a competing Western Canada LNG
export project.
The Georgia export project would need U.S. permission to export
to countries with which the U.S. doesn't have free-trade
agreements, and the companies must finalize investment decisions.
But due to Shell's deep pockets and its experience in the LNG
business, the effort could stand out amid 20 or so different
projects awaiting for permits to sell LNG to non-FTA countries. So
far only one project, Cheniere Energy Inc.'s (LNG) Louisiana
terminal, is authorized for exports and is under construction.
Shell and Houston-based Kinder Morgan said that they would seek
to modify El Paso Pipeline Partners LP's (EPB) Elba Express
Pipeline and the Elba Island LNG Terminal to move natural gas to
the terminal, liquefy it and ship it. El Paso, a Kinder Morgan
unit, will own 51% of the partnership and run the facility, and
Shell will own 49% and have rights to 100% of the liquefaction
capacity of the terminal. The project is expected to be able to
ship 350 million cubic feet of gas per day.
"This project will facilitate further development of the
abundant natural gas resources in the United States and will be a
positive factor in the overall balance of trade between the U.S.
and other countries," said Kinder Morgan Chief Executive Richard
Kinder in a statement.
The move to export natural gas from the U.S. underscores how the
technology to exploit shale fields has upturned the once dimming
American oil and gas industry.
As recently as a decade ago, companies that anticipated a
natural gas crunch due to declining domestic production were
spending billions in LNG import terminals to bring the commodity
from abroad. Now the rush is on to sell the fuel to markets in
Europe and Asia--a strategy that could offer U.S. producers a way
out of a domestic market glut, and that the recent DOE-commissioned
study said wouldn't dramatically affect the price of natural gas
here.
Some U.S. manufacturers that rely on cheap natural gas, such as
Dow Chemical Co. (DOW), have come out against unfettered exports of
the commodity, because they say selling too much of the fuel abroad
might result in high domestic prices.
Kinder Morgan, a key player in the U.S. energy sector, owns
thousands of miles of pipelines and other energy
infrastructure.
Its publicly traded companies include Kinder Morgan, Inc. (KMI),
Kinder Morgan Energy Partners, LP (KMP), Kinder Morgan Management
LLC (KMR) and El Paso Pipeline Partners.
Write to Angel Gonzalez at angel.gonzalez@dowjones.com
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