Daily GPI / NGI All News Access

Shell Entering Power Generation with Bechtel

March 18, 1999
/ Print
| Share More
/ Text Size+

Shell Entering Power Generation with Bechtel

Signaling what could become a trend among large producers, Shell yesterday said it is stepping into the independent power generation business with partner Bechtel Enterprises.

Shell and Bechtel formed a new venture to pursue power generation in North America. Using the InterGen North America brand name, the new company will develop, finance, own and operate large-scale independent power projects (IPPs) and co-generation facilities in the United States and Canada.

Jim Kekeisen, senior vice president acting for InterGen North America said, "Clearly this entity is being established because Shell really sees a value in expanding the value chain. So that's going to lead us to locations where there is this good power market but there is also a strong presence of the Shell organization."

InterGen will be capitalizing on Shell's strong reserve base and pipeline presence. "They have large refineries and the like that could provide excellent industrial hosts. I think we are going to focus initially where we have a proprietary edge rather than just plunking down a number of major facilities. One place it's most obvious these things come together is in the Gulf Coast region. These are areas where Shell is very strong and there's good, vibrant growth in the power sector." In Canada, Shell has strength in the Western Sedimentary Basin as well as the East Coast with participation in the Sable Island offshore project, Kekeisen noted.

InterGen North America will seek to replicate the success of InterGen, the international power generation venture owned by Shell Generating Ltd. and a subsidiary of Bechtel Enterprises Holdings Inc. Founded in 1995, InterGen has established itself as a leading international developer and owner of greenfield power facilities. Currently, InterGen is operating or building a total of six power stations representing 3,675 MW, in the United Kingdom, Mexico, the Philippines, Colombia and China. InterGen has an additional 5,925 MW for which it has secured contracts, bid awards or governmental mandates. In total, the company is pursuing more than two dozen project opportunities in 15 countries around the globe.

"Shell views power as a major commercial opportunity in the deregulating North American energy market," said Walter van de Vijver, CEO of Shell Exploration and Production Co. "InterGen North America is positioned to become a major competitor in this market, which will complement Shell's ongoing activities to build a platform for growth throughout the gas and power business."

John Olson, energy analyst for Sanders, Morris and Mundy, has been calling on major producers to reinvent their business, and this is just the kind of change he has been talking about. Back in January, Olson told a producer audience at the Canadian Embassy in Washington, D.C., there was no better time for them to invest in the gas-fired power business and sign more long-term agreements with end-use markets. "That's where the money is, ladies and gentlemen," he said (see Daily GPI Jan. 29, 1999).

Olson called the arrangement with Bechtel "a natural, organic evolution of Shell USA's game plan. The move into Tejas Gas over a year ago was the first sensible move made by a major North American oil company, and this is the next step. And I think given Shell and Bechtel's track records, it will be a fairly significant step. Wall Street has wondered about the financial implications of investing in Russian oil deals or things of that ilk with questionable pay-outs, and while most major oil companies are looking abroad, there is a very attractive energy marketplace right under their noses, meaning combined natural gas and power assets or power generation."

Olson's remarks to producers in January followed a disastrous fourth quarter for many of them, including Shell. Last month Shell Oil reported fourth quarter net income, excluding special items, of $59 million, a decrease of $397 million from fourth quarter 1997. Lower commodity prices were blamed.

InterGen North America operation will be headquartered in Houston. Carlos Riva, CEO of InterGen, will also be the CEO of the new venture; a worldwide search for a president is underway. "Much of our international experience is in highly deregulated markets and we look forward to leveraging that experience in the North American market, Riva said.

©Copyright 1999 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1231
Comments powered by Disqus