Kinder Morgan to buy 100pc of Elba Island LNG

OREANDA-NEWS. July 16, 2015. Kinder Morgan said it will buy Shell's stake in the planned Elba Island LNG export project in Georgia, making it the sole owner.

Shell will subscribe to all the planned liquefaction capacity for 20 years and sell modular liquefaction units to Kinder Morgan, the Houston-based midstream company said during an earnings call.

Kinder Morgan owns the existing Elba Island LNG import facility and 51pc of the export project. It will pay Shell about \\$630mn for the remaining 49pc of the equity, bringing its total investment in the project to \\$2.1bn. The project's total cost was previously pegged at \\$1.5bn.

Shell's decision was partly based on its planned acquisition of UK firm BG, which will give it significant access to US LNG, as well as the rising cost of the project, and the changing outlook for the LNG market because of falling oil prices, Kinder Morgan said. Falling oil prices have decreased the potential profits of US LNG exports.

Kinder Morgan said it was able to secure complete equity ownership at a good price.

The project expects to make a final investment decision late this year and start exporting in late 2017, which could make it the second or third LNG export facility to start operating in the contiguous US. Cheniere Energy's Sabine Pass LNG terminal in Louisiana is scheduled to start commercial operations in February 2016, and Dominion's Cove Point facility in Maryland is expected to come on line in late 2017. Elba Island was previously scheduled to come on line in phases from late 2016 to 2018

Elba Island would have baseload capacity of 2.5mn t/yr, equivalent to 350mn cf/d (9.9mn m?/d) from 10 modular liquefaction units and peak capacity of up to 4mn t/yr.

With its planned \\$70bn takeover of BG, Shell will have 20-year contracts totaling 5.5mn t/yr for LNG from Sabine Pass, with the first 3.5mn t/yr contract starting in February 2016. It also will have the rights to be the sole offtaker of the planned 15mn t/yr Lake Charles export project being developed in Louisiana, in partnership with midstream company Energy Transfer.

Kinder Morgan is also developing the Gulf LNG export project at its existing import terminal in Pascagoula, Mississippi, in a venture with GE and other partners. That project is expected to come on line in late 2020.