Shell's LNG Export Plans From US to Hit Australia
Shell's plan to export LNG from the United States is expected to increase competition for Australia in its traditional Asian markets, ABC News said in a report.
Shell US Gas & Power LLC , a subsidiary of Royal Dutch Shell, and Southern Liquefaction Company, LLC, a Kinder Morgan company and unit of El Paso Pipeline Partners, L.P., announced Sunday their intent to develop a natural gas liquefaction plant in two phases at Southern LNG Company, LLC’s (Southern LNG) existing Elba Island LNG Terminal, near Savannah, Georgia.
The project is expected to have liquefaction capacity of approximately 2.5 million tonnes per year (mtpa) of LNG or 350 million cubic feet of gas per day (Mmcfd). In June 2012, the Elba Island terminal received approval from the U.S. Department of Energy (DOE) to export up to 4 mtpa (500 Mmcfd) of LNG to Free Trade Agreement (FTA) countries. In August 2012, the terminal submitted a filing to the DOE seeking approval to export up to 4 mtpa (500 Mmcfd) of LNG to non-FTA countries. Phase I of the project, approximately 1.5 mtpa (210 Mmcfd), requires no additional DOE approval.
ABC News report quoted Resource analyst Edwin Bulseco, from DJ Carmichaels, as saying that the move suggests that future greenfield gas projects in Australia are at risk.
"It does represent a shift in strategy to a certain level compared to what the outlook probably was five years ago," he said. "The US has a significant amount of gas and potentially a low cost development environment compared to Australia at the moment, so I think it just shows their outlook is that there could higher rates of return with US projects."
He added that Australia is a high cost LNG Producer and only advantage it has over the US is the shipping cost due to its proximity to Asia. “But that can be significantly eroded given the high cost environment that Australia is operating in now," he said.
"The global LNG market is definitely changing, obviously, the US with shale gas, East Africa has now opened up given the huge gas discoveries offshore there."