A unit of Royal Dutch Shell plc and Energy Transfer LP (ETP) have signed a project framework agreement (PFA) to jointly develop a large-scale natural gas export facility in Lake Charles, LA, with capacity of 16.45 million metric tons/year (mmty).

The liquefied natural gas (LNG) export facility agreement provides a framework for Shell US LNG LLC and ETP to work 50-50 toward a final investment decision (FID). In addition, the parties are already working with potential engineering, procurement and contracting (EPC) companies with a plan to issue an invitation to tender (ITT) in the weeks ahead.

ETP last November said it remained committed to the project and expected to reach an FID this year.

“Lake Charles presents a material, competitive liquefaction project with the potential to provide Shell with an operated LNG export position on the U.S. Gulf Coast by the time global supply is expected to tighten in the mid-2020s,” said Shell’s Frederic Phipps, vice president, Lake Charles LNG. “Our partnership with Energy Transfer plays to our respective strengths. Together, we are expertly positioned to advance a project that could provide customers in Asia, Europe and the Americas with cleaner, reliable energy for decades to come.”

The Lake Charles project would combine Shell’s expertise as a global gas and LNG leader with ETP, which is one of the largest pipeline operators in the United States.

“We believe the combination of our assets and Shell’s LNG experience will create a platform for exporting natural gas from the U.S. Gulf Coast to the global marketplace that is unmatched,” ETP’s Tom Mason, president of Lake Charles LNG said.

The PFA defines the commercial terms by which the two companies would work toward delivering an export facility on the Gulf Coast. Shell is to act as the project lead before the companies decide whether to sanction the project. If it moves forward, Shell would act as construction manager and operator. ETP would act as site manager and project coordinator until an FID is made.

“The decision to make an affirmative FID to proceed with construction of the project will be subject to both companies’ assessment of the outcome of the EPC bidding process, overall project competitiveness and global LNG market conditions at the time of such decision,” Mason said.

ETP’s liquefaction facility in Lake Charles “is fully permitted, uses existing infrastructure and benefits from abundant natural gas supply and proximity to major pipeline infrastructure, including Energy Transfer’s vast pipeline network,” the partners noted. “If built, the project is estimated to create up to 5,000 local jobs during construction and 200 full-time positions when fully operational.”

Shell is an LNG pioneer with more than 50 years of experience and has been involved in every stage of the value chain. The major has LNG supply projects around the world, including LNG Canada now underway, as well as interests in and long-term capacity access to regasification plants.

Shell’s majority owned (67.5%) Prelude floating LNG facility in Australia, considered the world’s largest floating project, opened some wells in December. The project is designed to produce 3.6 mmty, with exports directed to Asia Pacific markets.

Shell is also majority owner of LNG Canada, sanctioned last year for the British Columbia coast. LNG Canada is now tracking to be online and shipping to Tokyo Bay by the mid-2020s. Initially, the project is to consist of two liquefaction trains that together would provide 14 mmty.

In Shell’s annual LNG Outlook issued in February, the major estimated gas consumption worldwide last year increased to 319 mmt, with global supply set to increase by 35 mmt this year. Demand is forecast to rise to 384 mmt in 2020. The LNG trade in 2000 was estimated at 100 mmt.

In addition, a rebound in new long-term LNG contracting last year may “revive investment in liquefaction projects,” Shell said. However, based on current demand projections, LNG supply was still seen tightening in the mid-2020s, similar to other global forecasts.

Lake Charles LNG faces competition from other Gulf Coast projects in both Louisiana and Texas.

In Louisiana specifically, Cheniere Energy Inc.’s fifth train at the Sabine Pass facility was substantially completed earlier in March. In addition, Sempra Energy’s Cameron, LA, export project, a 15 mmty facility, is expected to begin operations this year.

Yet to be sanctioned are three big Louisiana projects.

Tellurian Inc. is working on the 27.6 mmty Driftwood LNG project near Lake Charles, which is expected this year to decide whether to move forward with sanctioning.

Venture Global LNG has two Louisiana export projects on the drawing board. Federal regulators in March approved full site preparation for the Calcasieu Pass project. Sanctioning of Calcasieu Pass and the proposed Plaquemines LNG project are expected in 2019.