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Shell Throttles Back Its LNG Plans

March 24, 2014 in Companies, LNG by Rich Piellisch  |  No Comments

Jumping Pound in Alberta Canceled, Geismar and Sarnia on Hold

Shell is cutting back its plans for producing liquefied natural gas as a transportation fuel, canceling a liquefaction facility at its Jumping Pound plant in Alberta, and placing plans for Geismar, La. and Sarnia, Ont. – intended to serve the Great Lakes and Gulf Coast, respectively – on hold. updated March 25

Why indeed, Shell asks.

Why indeed, Shell asks.

The Geismar and Sarnia MMLS (moveable, modular liquefaction system) units “are under review,” says a spokeswoman in Houston. “We want to make sure we are on pace with demand as it’s growing,” she told F&F. “We are looking to ensure that we are doing the right thing at the right time in the right place.”

According to a more formal statement, “The pause will allow the review of LNG for transport opportunities in North America in order to ensure a flexible and competitive portfolio… We continue to adapt to the growing demand from sectors like marine and on-road while evaluating the most promising locations and opportunities.”

‘Perfect Target for Trimming’

Sources agree that it comes down to money and a profit squeeze forcing projects like small-scale LNG to take a back seat.

Shell CEO Ben van Beurden outlined the firm’s new austerity – “disciplined capital investment” and “enhanced capital efficiency” – last week. It is “clear,” he said, “that we need to get a tighter grip on performance management in Shell…

Dr. Stuart Macdonald of Shell’s LNG New Markets Team outlined plans for MMLS facilities at the EGATEC 2013 European Gas Technology Conference in Paris.

Dr. Stuart Macdonald of Shell’s LNG New Markets Team outlined plans for MMLS facilities at the EGATEC 2013 European Gas Technology Conference in Paris.

“With sharper accountability in the company, this approach will target growth investment more effectively,” Ben van Beurden said.

“It’s a lack-of-customer issue and Shell otherwise retrenching across the board,” says one observer. Shell is “pulling back on smaller and more discretionary projects as they focus on the core business,” he says. “This is the perfect target for such trimming.”

One source pegs the final overall cost of an MMLS facility at $560 million. “Companies don’t make decisions without making money,” he says. “Nothing about liquefaction is cheap.”

One LNG Truck Stop Is Open, in Calgary

He predicts that Shell will come back to the MMLS plants when the time is right and that, indeed, Shell engineers continue to improve the designs. He also said that he expects Shell to live up to its fuel delivery commitments from other sources, perhaps taking advantage of existing excess peak-shaving capacity for LNG.

Bison Transport is the lead fleet customer as Shell has opened Canada’s first retail LNG station, in Calgary.

Bison Transport was the lead fleet customer when Shell has opened Canada’s first retail LNG station, in Calgary, last year (F&F, March 13, 2013).

To move fuel from whatever source, he expects Shell will go forward with plans to commission at least one LNG bunker barge for marine customers. A decision on bunker barges for both the Gulf Coast and Great Lakes is “imminent,” according to a report last week citing remarks by Shell marine project engineer Bill Hutchins.

Shell says that the first of its proposed network of truck stop LNG stations is open: a Shell Flying J outlet in Calgary. A station in Edmonton has been completed but awaits commissioning, the company says. Three had been planned (F&F, March 13, 2013).

In the U.S., “We’re working on our first station for 2104,” the spokeswoman says. It’s expected to be in Ontario, Calif., and will support LNG truck operators including C.R. England (F&F, February 15).

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Source: Shell and published reports with Fleets & Fuels follow-up

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