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Shell Closes Repsol LNG Purchase, Increases Shipping Capacity

Royal Dutch Shell plc on Thursday completed its purchase of Repsol SA's liquefied natural gas (LNG) portfolio outside of North America, giving it a wider berth in the Atlantic Basin, as well as existing charter leases to substantially increase its global reach.

The transaction gives Shell an additional 7.2 million metric tons/year (mmty) of directly managed LNG volumes through long-term offtake agreements, boosted with LNG supply in the Atlantic from Trinidad and Tobago, and in the Pacific from Peru. In addition, it immediately contributed to cash flow, while requiring limited ongoing capital spending.

The transaction was struck last February for $4.4 billion cash (see Daily GPI,Feb. 27, 2013). The purchase also included assuming leases for LNG ship charters that at the time were worth about $1.8 billion. At closing Shell paid $3.8 billion cash and  assumed $1.6 billion in liabilities. Repsol's Canaport LNG regasification terminal in Saint John, NB, was not included.

Shell acquired in the deal 4.2 mmty net equity LNG plant capacity, which increased its equity global capacity by around 20%, to 26 mmty from 22 mmty. Included in the transaction were:

  • Atlantic LNG Co. of Trinidad and Tobago trains 1-4; 14.8 mmty capacity on a 100% basis, with 20-25% equity/train;
  • Peru LNG Co.'s 4.45 mmty capacity on a 100% basis, with 100% offtake and 20% equity; and
  • Carrier fleet that consists of both long-term and short-term time charters.

Although the Canaport facility was not part of the purchase, Shell committed to supply around 0.1 mmty to the Canaport terminal over 10 years. Historically, most of the LNG shipped to Canaport had come from Qatar, and Trinidad and Tobago (see Daily GPI, July 25, 2012).

Last month the second phase of Southern LNG Co.'s Elba Island LNG Terminal near Savannah, GA, was given the go-ahead by subsidiary Shell US Gas & Power LLC (see Daily GPI, Dec. 20, 2013; Jan. 29, 2013). Phase I of the proposed facility would provide 210 MMcf/d and be in service by early 2017. Phase two would add 70 MMcf/d (0.5 mmty) to 140 MMcf/d (1.0 mmty). The project is awaiting approval by the Federal Energy Regulatory Commission.

In December, Shell floated out of dry dock in South Korea the hull for a floating LNG (FLNG) facility for the massive Australian Prelude facility now in development (see Daily GPI, Oct. 9, 2009).

Once completed, Prelude FLNG is expected to be the largest facility of its kind ever built, able to produce 3.6 mmty, 1.3 mmty of condensate and 0.4 mmty of liquefied petroleum gas.

"Making FLNG a reality is no simple feat," said Shell Projects & Technology Director Matthias Bichsel said in December. "A project of this complexity -- both in size and ingenuity -- harnesses the best of engineering, design, manufacturing and supply chain expertise from around the world."

The Prelude FLNG hull is longer than four soccer fields laid end to end and longer than the Empire State Building is tall, according to Shell.

FLNG would allow Shell to produce natural gas at sea, turn it into LNG and transfer it directly to ships for transport. Prelude is the first deployment of Shell's floating technology, which would allow development in a remote area of Western Australia  for about 25 years. Prelude FLNG would be able to withstand a Category 5 cyclone.

In September, Woodside Exploration Ltd. said it would use the Shell FLNG technology as the development concept to progress through the basis of design phase to commercialize Australia's Browse gas fields. Last April the Australian explorer said high costs would force it to scrap plans for its proposed onshore Browse LNG development (see Daily GPI, April 15, 2013).

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