Shell announces LNG plants for transportation sector

Energy company Royal Dutch Shell PLC has announced plans to build two liquified natural gas (LNG) plants in North America to produce fuel for marine and heavy-duty on-road transportation.

Shell, a global group of energy and petrochemicals companies, may be most famous for its roadside gas stations, but also operates businesses in crude oil and natural gas production, refining, marketing, and research and development. According to a press release issued yesterday, Shell and its affiliates now plan to develop two liquefaction units to turn natural gas into LNG.

By cooling natural gas to around -260°F, it can be liquefied.  The resulting LNG takes up significantly less volume than the gas did, making it easier to ship and store.  Unlike gas taken directly off a pipeline, LNG can also be used as a mobile fuel source for transportation.  Compared to oil-based fuels such as diesel and gasoline, LNG can be less expensive and may create fewer emissions of carbon dioxide and pollutants.

Shell's newly announced plants will be built in Geismar, Louisiana and Sarnia, Ontario, Canada.  The Geismar plant will supply LNG along the Mississippi River, the Intra-Coastal Waterway and to the offshore Gulf of Mexico and the onshore oil and gas exploration areas of Texas and Louisiana.  Shell is partnering with companies including subsidiaries of Martin Resource Management Corporation and Edison Chouest Offshore to supply LNG fuel to marine vessels that operate in the Gulf of Mexico.  Under Shell's vision, LNG produced at Geismar will be barged to Port Fourchon, Louisiana, where it will be bunkered into customer vessels.  Shell also announced plans for a similar liquefaction unit at its Shell Sarnia Manufacturing Centre in Sarnia, Ontario, Canada.  The Sarnia project is designed to supply LNG fuel to all five Great Lakes, their bordering U.S. states and Canadian provinces and the St. Lawrence Seaway.

Each facility will be relatively small-scale, capable of producing 250,000 tons of gas per year. According to Shell, pending final regulatory permitting, the liquefaction units may begin operations and production in about three years.  Shell is currently developing a similar gas processing facility in Alberta, Canada, and plans to sell LNG at truck stops in that province.

Several years ago, energy companies rushed to develop LNG import terminals in the U.S. to increase supplies of natural gas in the interstate pipeline system.  Hydraulic fracturing and the resulting development of feasible production of domestic natural gas from shale resources turned LNG imports' economics on their heads.  Now that natural gas in most of the U.S. is significantly cheaper than imported LNG, companies like Cheniere Energy Inc. are now seeking to export LNG to other countries.  Domestic use of LNG in the transportation sector represents an alternative way for energy companies to profit from the shale gas boom.