Lessons from Shell’s LNG fuel retreat

Royal Dutch Shell has recently retreated from plans to develop LNG production capacity throughout North America. Zeus Development Corporation, an energy researcher that specializes in natural gas markets, has identified five key tactics that successful LNG suppliers have been using to outgrow Shell.

Liquefaction capacity

President of Zeus, Bob Nimocks, commented: "Smaller suppliers have learned to increment their liquefaction capacity effectively with demand. The projects advancing are 50 000 to 150 000 gallons per day, not the 250 000 to 500 000 gallon per day units Shell proposed."

Cancelled projects

On 26th March, just after Shell cancelled the 300 000 tpa Jumping Pound, Alberta, project, the company announced it would also abandon its two remaining 250 000 gall. /d LNG projects in Louisiana, and Ontario. In total, Shell planned to spend as much as US$ 1 billion to build infrastructure, including more than a hundred fuels stations.

Spectrum LNG

Spectrum LNG is one company that has successfully added capacity as Shell analyzed the market. Spectrum President, Ray Latchem, explained that development and construction methods are a large part of the capital expenditure equation, and they should be carefully monitored.

Upstream analogy

Latchem commented: "A good analogy is the upstream oil sector. Deep offshore is for the super majors; stripper wells are for smaller independents. Both make oil, but with hugely different cost structures. I don't hire large refinery types to design and build my LNG plants, but they perform just as well as any competitor's."

Five tactics

The five tactics identified by Zeus as those used by competitors to outgrow Shell are:

1. Smaller capacity increments
2. Cost reduction
3. Flexible, mobile technology
4. Fully realized alliances and joint ventures
5. Collaboration

Shell’s North American LNG fuels venture, and more information about the five tactics, can be accessed here.

Adapted from press release by Katie Woodward

Read the article online at: https://www.lngindustry.com/liquid-natural-gas/02042014/shell_lng_fuel_retreat/