MOSCOW (MRC) -- Shell said Monday it will not move ahead with its planned equity interested in the Lake Charles LNG project in Louisiana, citing difficult market conditions, and that its partner, Energy Transfer, would instead take over as the project's developer, reported S&P Global.
"This decision is consistent with the initiatives we announced last week to preserve cash and reinforce the resilience of our business," Shell's director of integrated gas and new energies, Maarten Wetselaar, said in a statement.
Last week Shell announced plans to cut 2020 capital expenditures to USD20 billion from the roughly USD25 billion previously envisaged and operating costs by USD3 billion to USD4 billion over the next 12 months.
"Whilst we continue to believe in the long-term viability and advantages of the project, the time is not right for Shell to invest," Wetselaar said.
Shell said that, during the transition, it would continue to help Energy Transfer with the bidding process for the energy, procurement, and construction contract, and then planned a phased handover of the remaining activities. The two companies signed a project framework agreement last March.
Energy Transfer, in a separate announcement, confirmed it will take over as lead developer and continue advancing project, although it is evaluating alternatives including bringing in one or more equity partners and scaling back the project from three trains to two and reducing the planned capacity to 11 million mt/year from 16.45 million mt/year.
Energy Transfer's Executive Vice President and President-LNG, Tom Mason, said the company is in "discussions with several significant LNG buyers from Europe and Asia regarding LNG offtake arrangements as well as, in some cases, a potential equity investment in the project."
"We continue to believe that Lake Charles is the most competitive and credible LNG project on the Gulf Coast," said Mason. "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," he said, adding the project also benefits from connectivity to Energy Transfer's nationwide pipeline system.
The Louisiana project has approved capacity of more than 2 Bcf/d. It received authorization from the Federal Energy Regulatory Commission in December 2015. Completion of the terminal was previously targeted for late 2025, but the project had yet to reach a final investment decision.
As MRC informed earlier, Shell Singapore restarted its naphtha cracker in Bukom Island in early December 2019, following a two months maintenance shutdown since the beginning of October 2019. Thus, this cracker was taken off-stream for the turnaround on 1 October 2019. The cracker is able to produce 960,000 tons/year of ethylene and 550,000 tons/year of propylene.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
MRC