Royal Dutch Shell plc won’t be sitting on the sidelines as others attempt to turn North America into a liquefied natural gas (LNG) exporting hub, CFO Simon Henry said Thursday. Shell not only plans to join a growing list of competitors, but it also is considering projects to turn natural gas into motor fuels and chemicals, he said.

Henry made the comments during a conference call to discuss the European-based oil major’s 3Q2011 earnings report. Sustained low natural gas prices — and the abundance of unconventional gas in the United States — give Shell an “opportunity,” he told investors.

“We do expect LNG exports from North America,” said Henry. “The supply is potentially significant from shale gas.” The company earlier this month confirmed that it bought an old marine terminal in Kitimat, BC, and is exploring with its Asian partners the potential for the site as an LNG export facility (see Daily GPI, Oct. 24).

Shell’s export plan would join at least two already in the works in locations on the Douglas Channel near Kitimat. Encana Corp. and Canadian affiliates of Apache Corp. and EOG Resources Inc. are partners in the proposed $4.5 billion KM LNG project, which this month was granted an export license by the National Energy Board (see related story and Daily GPI, Oct. 17). And BC LNG, also known as the Douglas Channel Energy Project, is putting together a supply pool or marketing cooperative that calls for LNG exports averaging 5,000 metric tons (250 MMcf) per day by a team of traders and producers (see Daily GPI, Sept. 6).

The only problems that could stand in the way of exporting LNG are U.S. concerns about the security of energy supplies, which could limit domestic gas exports, said Henry.

“Energy security, particularly in the U.S., will probably limit” export volumes of LNG, he said.

But the plan is worth pursuing. “You can see potentially attractive returns out there.” Exporting gas “gives us a chance to arbitrage the price differential between $4 gas in North America and with what in the last quarter was around $15 gas prices in Asia.”

The partners weren’t discussed, but Simon said it was “highly likely” that PetroChina Inc. would participate, following talks with Shell in Australia and China, Henry added.

Shell advanced several upstream projects during the quarter, including some LNG-related facilties. One of the biggest, the Green Corridor project, is a LNG-for-transport project planned in Canada that would produce transport fuels and chemicals. Henry noted that project would be able to convert gas into 300,000 tons of LNG a year to fuel long-distance transportation.

Also on tap are two LNG-related projects in Australia. Arrow Energy Holdings Pty Ltd., a joint venture with PetroChina, announced the front-end engineering for the Arrow LNG project on Curtis Island. Also in Australia a final investment decision was taken on the Wheatstone LNG foundation project; Shell has a 6.4% stake. The foundation project includes two LNG trains with a combined capacity of 8.9 million tons.

The Athabasca Oil Sands Project Expansion 1 in Canada and the Pearl Gas-to-Liquids (GTL) Train 1 in Qatar have ramped up and production “should stabilize at plateau rates shortly,” said CEO Peter Voser. “We expect to start up Train 2 of Pearl GTL before the end of 2011, as planned. These projects in Qatar and Canada are part of a series of over 20 new upstream start-ups planned for 2011-14, as we deliver on our plans for sustainable growth, driving Shell’s financial and operating targets for 2012.”

The company earned $7.25 billion in 3Q2011, which was 106% more than in the year-ago period. Cash flow from operating activities was $11.6 billion, versus $9 billion in 3Q2010. Net capital investments reached $6.1 billion in the latest quarter. Return on average capital employed was 16.4%.

During 3Q2011 Shell’s upstream production grew by 2% from year-ago levels, driven by the continued ramp-up of growth projects in Qatar and Canada. Shell’s LNG sales volumes increased by 12%. to 4.76 million tons. New field start-ups and the continuing ramp-up of fields contributed 270,000 boe/d. which more than offset the impact of field declines.

Global liquids realizations were 48% higher than in the third quarter 2010. Global natural gas realizations were 31% higher than in the same quarter a year ago. Natural gas realizations in the Americas increased by 1%, while gas realizations outside the Americas increased by 40%.

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