Units of Royal Dutch Shell plc and Kinder Morgan Inc. are forming a partnership to develop a natural gas liquefaction and export plant in two phases at Southern LNG Co. LLC’s Elba Island LNG Terminal near Savannah, GA.

Kinder Morgan Inc.’s Southern Liquefaction Co. LLC (a unit of El Paso Pipeline Partners LP) and Royal Dutch Shell plc’s Shell US Gas & Power LLC are using the import terminal that Kinder Morgan acquired in its acquisition of El Paso Corp. last year (see Daily GPI, May 25, 2012).

Last fall, Kinder CEO Rich Kinder talked up plans to export liquefied natural gas (LNG) from the Elba terminal as well as from Kinder’s Gulf LNG Terminal in Pascagoula, MS. He said at the time that both facilities have authority from the U.S. Department of Energy (DOE) to export to countries that are parties to free trade agreements (FTA) with the United States.

“No one knows for sure what’s going to happen on the non-FTA [export approvals at DOE],” he said. “We believe we will be able to put together a project at Elba that will be FTA, and it will have some optionality to expand if and when we got [non-FTA export approval],” Kinder told financial analysts during a conference call in October (see Daily GPI, Oct. 19, 2012).

On Monday the Shell and Kinder affiliates said they had agreed to modify El Paso Pipeline Partners’ Elba Express Pipeline and the Elba terminal to transport gas to the terminal and to load LNG onto ships for export.

“This project will facilitate further development of the abundant natural gas resources in the United States and will be a positive factor in the overall balance of trade between the U.S. and other countries,” Kinder said Monday, adding that non-FTA export approval for the facility is expected “in due course.”

Shell Oil President Marvin Odum emphasized the project’s “measured, phased approach.”

El Paso Pipeline Partners, through affiliates, will own 51% of the entity and operate the facility. Shell, through its affiliates, will own the remaining 49% and subscribe to 100% of the liquefaction capacity. The project will use Shell’s small-scale liquefaction unit, which will be integrated with the existing Elba Island facility and enable rapid construction compared to traditional large-scale plants, the partners said.

The project is expected to have liquefaction capacity of 2.5 million tonnes per year (mtpa) of LNG or 350 MMcf/d of gas. Last June, the Elba terminal received approval to export up to 4 mtpa (500 MMcf/d) of LNG to FTA countries. Last August, the terminal submitted a filing to the DOE seeking approval to export up to 4 mtpa (500 MMcf/d) of LNG to non-FTA countries. Phase I of the project, 1.5 mtpa (210 MMcf/d), requires no additional DOE approval.

As of last week, more than 100 members of the House of Representatives have called on Energy Secretary Steven Chu to approve exports of LNG to non-FTA countries, and ExxonMobil Corp. and America’s Natural Gas Alliance followed suit. But a group representing natural gas municipal utilities urged the Obama administration to reject the export applications that are pending at the department (see Daily GPI, Jan. 28).

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