Kinder Morgan and Shell have announced that they have reached an agreement for Kinder Morgan to purchase 100% of Shell's equity interest in Elba Liquefaction Co. (ELC), the owner of the Elba Liquefaction Project, which is proposed to be constructed and operated at the existing Elba Island LNG Terminal near Savannah, Georgia. Kinder Morgan currently owns 51% of the ELC joint venture. Shell owns the remaining 49% and subscribes to 100% of the liquefaction capacity. Kinder Morgan will purchase the remaining 49% of the joint venture that it does not already own. Kinder Morgan's expected incremental investment resulting from this transaction is approximately US$630 million, bringing its total incremental investment in all the liquefaction and terminal facilities at Elba Island to approximately $2.1 billion.
Permitting continues for the proposed Elba Liquefaction Project, which consists of 10 small-scale liquefaction units to be purchased from Shell. They will be integrated with the existing Elba Island facility and enable rapid construction compared to traditional large-scale plants. The next step in the regulatory approval process is for the Federal Energy Regulatory Commission to issue a draft environmental assessment. Subject to regulatory approvals, construction could begin in 4Q 2015, with initial production expected to occur in late 2017.
"This is a good opportunity to leverage the proven track record of both companies to deliver an innovative LNG export project in the United States," said Ton Ten Have, Shell Upstream Americas vice president LNG operations and growth. "Shell and Kinder Morgan have successful relationships in North America based on Kinder Morgan ownership with Shell as a customer and we believe this will be a successful model at Elba as well."
In 2012, the project received authorization from the Department of Energy to export to Free Trade Agreement (FTA) countries. An application to export to non-FTA countries is pending. Under full development, the Elba Liquefaction Project is expected to have a total capacity of approximately 2.5 MTPA of LNG for export, which is equivalent to approximately 350,000 Mcf/d of natural gas.
The project was first announced in January 2013 by Southern Liquefaction Co., a unit of Kinder Morgan in Delaware, and Shell to add liquefaction and export capability to Southern LNG Co.’s existing liquefied natural gas regasification terminal at Elba Island in Chatham County, Georgia.