By July 16, 2015 Read More →

Elba Liquefaction Company: Kinder Morgan buys 100% interest, invests $630M

Shell sells 49% interest, subscribes to 100% of liquefaction capacity of Elba Liquefaction Company

Kinder Morgan is buying the remaining 49 per cent interest in the Elba Liquefaction Company LNG plant and investing another $630 million in the facility as it awaits approval to export to non-free trade countries.

Elba Liquefaction Company

Elba Liquefaction Company facility, Savannah, Georgia. Photo: Kinder Morgan.

Kinder Morgan, Inc. (KMI) and Shell (NYSE: RDS.A, RDS.B) announced Wednesday in a press release that they have reached an agreement for Kinder Morgan to purchase 100 per cent of Shell’s equity interest in Elba Liquefaction Company, LLC (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 per cent of the Elba Liquefaction Company joint venture. Shell owns the remaining 49 per cent and subscribes to 100 per cent of the liquefaction capacity.

“We are very pleased to purchase Shell’s equity interest in the joint venture and advance the project with Shell’s continued support and subscription to 100 per cent of the capacity of our world-class Elba Island terminal,” said Kinder Morgan East Region Natural Gas Pipelines President Kimberly S. Watson.

“We look forward to this additional investment opportunity that provides attractive returns and that serves a high-credit quality customer in Shell.”

Kinder Morgan’s expected incremental investment resulting from this transaction is approximately $630 million, bringing its total incremental investment in all the liquefaction and terminal facilities at Elba Island to approximately $2.1 billion, the companies said in the release.

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 fourth quarter of 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 VP 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 million tonnes per year of LNG for export, which is equivalent to approximately 350,000 Mcf per day of natural gas.

The project was first announced in January 2013 by Southern Liquefaction Company, LLC, a Delaware limited liability company, and a unit of Kinder Morgan, and Shell to add liquefaction and export capability to Southern LNG Company, L.L.C.s existing liquefied natural gas regasification terminal at Elba Island in Chatham County, Georgia.

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