Signaling what could become a trend among large producers, Shellyesterday said it is stepping into the independent power generationbusiness with partner Bechtel Enterprises.
Shell and Bechtel formed a new venture to pursue powergeneration in North America. Using the InterGen North America brandname, the new company will develop, finance, own and operatelarge-scale independent power projects (IPPs) and co-generationfacilities in the United States and Canada.
Jim Kekeisen, senior vice president acting for InterGen NorthAmerica said, “Clearly this entity is being established becauseShell really sees a value in expanding the value chain. So that’sgoing to lead us to locations where there is this good power marketbut there is also a strong presence of the Shell organization.”
InterGen will be capitalizing on Shell’s strong reserve base andpipeline presence. “They have large refineries and the like thatcould provide excellent industrial hosts. I think we are going tofocus initially where we have a proprietary edge rather than justplunking down a number of major facilities. One place it’s mostobvious 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 strengthin the Western Sedimentary Basin as well as the East Coast withparticipation in the Sable Island offshore project, Kekeisen noted.
InterGen North America will seek to replicate the success ofInterGen, the international power generation venture owned by ShellGenerating Ltd. and a subsidiary of Bechtel Enterprises HoldingsInc. Founded in 1995, InterGen has established itself as a leadinginternational developer and owner of greenfield power facilities.Currently, InterGen is operating or building a total of six powerstations representing 3,675 MW, in the United Kingdom, Mexico, thePhilippines, Colombia and China. InterGen has an additional 5,925MW for which it has secured contracts, bid awards or governmentalmandates. In total, the company is pursuing more than two dozenproject opportunities in 15 countries around the globe.
“Shell views power as a major commercial opportunity in thederegulating North American energy market,” said Walter van deVijver, CEO of Shell Exploration and Production Co. “InterGen NorthAmerica is positioned to become a major competitor in this market,which will complement Shell’s ongoing activities to build aplatform for growth throughout the gas and power business.”
John Olson, energy analyst for Sanders, Morris and Mundy, hasbeen calling on major producers to reinvent their business, andthis is just the kind of change he has been talking about. Back inJanuary, Olson told a producer audience at the Canadian Embassy inWashington, D.C., there was no better time for them to invest inthe gas-fired power business and sign more long-term agreementswith end-use markets. “That’s where the money is, ladies andgentlemen,” he said (see Daily GPI Jan. 29, 1999).
Olson called the arrangement with Bechtel “a natural, organicevolution of Shell USA’s game plan. The move into Tejas Gas over ayear ago was the first sensible move made by a major North Americanoil company, and this is the next step. And I think given Shell andBechtel’s track records, it will be a fairly significant step. WallStreet has wondered about the financial implications of investingin Russian oil deals or things of that ilk with questionablepay-outs, and while most major oil companies are looking abroad,there is a very attractive energy marketplace right under theirnoses, meaning combined natural gas and power assets or powergeneration.”
Olson’s remarks to producers in January followed a disastrousfourth quarter for many of them, including Shell. Last month ShellOil 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 inHouston. Carlos Riva, CEO of InterGen, will also be the CEO of thenew venture; a worldwide search for a president is underway. “Muchof our international experience is in highly deregulated marketsand we look forward to leveraging that experience in the NorthAmerican market, Riva said.
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