UPDATE 1-Shell, Kinder plan to export natgas from United States

Mon Jan 28, 2013 2:38pm EST

* LNG exports planned from Elba Island near Savannah, Georgia

* LNG cargoes fetch as much as $18/mmBtu, US price below $4

* Exports have US DOE approval but project under review

By Jeanine Prezioso

NEW YORK, Jan 28 (Reuters) - With U.S. natural gas prices stuck at much less than half global levels, Royal Dutch Shell and Kinder Morgan Inc said on Monday they are teaming up to export liquefied natural gas from a terminal that was originally built to import gas.

More energy companies with access to low-priced, abundant U.S. gas supplies are trying to take advantage of much higher global prices by boosting exports. But regulators have yet to approve the plan, and some U.S. businesses and consumers bristle at an idea that they fear could mean higher domestic prices.

Kinder Morgan, through its El Paso Pipeline Partners unit Southern Liquefaction Co LLC, and Shell through its Shell U.S. Gas & Power LLC subsidiary, plan to develop a natural gas liquefaction export terminal at Southern's existing gas import terminal at Elba Island, near Savannah, Georgia.

A liquefaction plant cools natural gas at very low temperatures to turn it into liquid so it can be exported on LNG tankers.

The U.S. Department of Energy (DOE) has said the companies would be allowed to export up to 500 million cubic feet per day (mmcf/d) of LNG to countries that fall within the free trade agreement (FTA). But the specific project needs other regulatory approvals, including the okay to export to non-FTA countries.

The companies also have applied to the U.S. Federal Energy Regulatory Commission (FERC) for review under the National Environmental Policy Act, an El Paso spokesman told Reuters in an email.

The announcement follows the December release of a study commissioned by the Department of Energy that supported the export of natural gas, under the premise that it would help boost the U.S. economy.

The fertilizer industry, for one, expressed disappointment with the study in a comment sent to the DOE since it uses natural gas as a feedstock which in turn supports food production.

El Paso needs to modify its Elba Express Pipeline to ship gas to the terminal for export. Elba Express, a 190 mile pipeline that went into service in 2010, was designed to deliver up to 945 mmcf/d of gas imported at the Elba Island LNG terminal to eastern U.S. markets.

GAS IMPORTS THIN

Imports of natural gas into the United States have remained thin, at best, in the past few years, as U.S. natural gas production has ballooned.

Companies who own LNG import terminals or who have booked capacity at a terminal to import gas are left with little wiggle room, some analysts say.

"If you're a company and your business is importing LNG in the U.S., your business model isn't going to work unless you flip it around and start exporting," Dave Pursell, managing director with energy consultancy Tudor, Pickering, Holt & Co told Reuters via telephone from Houston.

Gas producers have worked to perfect technology to unlock gas deposits trapped between horizontal layers of rock below ground. This has dampened U.S. gas prices, which did not rise above $4 per million British thermal units (mmBtu) last year.

Cargoes of the liquefied fuel have fetched as much as $18 per mmBtu recently in global markets.

Other companies have also begun the U.S. LNG export process.

Cheniere Energy is developing five so-called liquefaction "trains" to cool and liquefy the fuel to send it abroad from its Sabine Pass LNG plant in Louisiana. Last month, the company said it had signed a deal under which France's Total would buy LNG from the Sabine plant for export to global markets.

Also last month Sempra Energy said it had it applied for FERC approval to construct export facilities at its existing Cameron gas import terminal in Louisiana.

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