Freeport LNG in talks with Shell to export gas from US Gulf Coast


Royal Dutch Shell is in advanced negotiations with Freeport LNG Expansion L.P. to become a major exporter of liquefied natural gas from the US Gulf Coast, Freeport's CEO Michael S. Smith said Tuesday.

Mr. Smith said he hopes to finalize an agreement with the Shell by the end of 2012 for the global energy giant to take 1.35 billion cubic feet/day of natural gas for export from Freeport LNG's Texas facility.

If the deal is signed, Mr. Smith said, the liquefied natural gas facility could be operational by 2018 or 2019. A spokesman for Shell confirmed that it was in negotiations with Freeport.

Freeport LNG also announced on Tuesday it had signed a binding agreement with Japanese power companies Osaka Gas Co. and Chubu Electric Power Co.

The Japanese companies have agreed to contract for about 650 million cubic feet/day of LNG capacity from Freeport. This gas would be liquefied, put on tankers and exported to Japan.

Growing supplies of natural gas in the US and growing demand from Asian countries has drawn interest in this export trade. The US currently exports a small amount of gas to Japan, from Alaska, and into Mexico.

Freeport still needs to obtain licenses from both the Department of Energy and the Federal Energy Regulatory Commission before the LNG facility can be built or gas exported to Japan.

Mr. Smith said these approvals are expected by next year.

“We are investing for new growth both in onshore gas and LNG,” said Shell spokesman Bill Tanner. “We see a good, reliable supply of gas in the US for both domestic use and export.”

Shell is also looking into gas export from Canada. Last week, it filed an application with Canadian authorities to build an export facility in British Columbia along with Korean and Chinese partners.

This facility, at full capacity, would be capable of exporting 3.4 billion cubic feet of gas daily.

Dow Jones Newswires

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