Energy Transfer assumes control, presses forward with Lake Charles LNG project

With Shell’s decision to pull out of the Lake Charles LNG export project in Texas, its business partner, Energy Transfer LP, has decided to take over as project developer and to restructure the project to meet current market conditions.

Shell announced last week that it would not proceed with an equity investment in the project amid those same conditions. Shell and Energy Transfer had a project framework agreement in place since March 2019, wherein they agreed to share the costs, engineering, procurement, and construction of developing Lake Charles. However, Energy Transfer will be taking over while weighing alternatives for its advancement.

“We continue to believe that Lake Charles is the most competitive and credible LNG project on the Gulf Coast,” Tom Mason, Energy Transfer’s executive vice president and president of LNG, said. “Having the ability to capitalize on our existing regasification infrastructure at Lake Charles provides a cost advantage over other proposed LNG projects on the Gulf Coast. The Lake Charles project also benefits from its unparalleled connectivity to Energy Transfer’s existing nationwide interstate and intrastate pipeline system that provides direct access to multiple natural gas basins in the U.S.”

Shell has said that it will support Energy Transfer during the transition process. Meanwhile, the possible alternatives Energy Transfer is considering include bringing in one or more equity partners or reducing the size of the project down from three trains to two. The former could include buyers from Europe and Asia for offtake arrangements, according to Mason.

“In light of the advanced state of the development of the project, we remain focused on pursuing this project on a disciplined, cost efficient basis and, ultimately, the decision to make a final investment decision will be dependent on market conditions and capital expenditure considerations,” Mason said.