THE WALL STREET JOURNAL: Shell Plans Natural-Gas Exports From Russia to Mexico by 2008 (ShellNews.net)
By CHIP CUMMINS
Staff Reporter of THE WALL STREET JOURNAL
October 15, 2004
LONDON -- Royal Dutch/Shell Group said it plans to begin exporting a modest amount of Russian natural gas to Mexico by 2008, marking the first concrete move toward opening Russia's massive reserves to gas-hungry energy markets in North America. Shell said it will market in the U.S. excess gas not used in Mexico.
Russia's vast gas deposits have long supplied European homes and power plants through pipelines, but the expense of liquefying gas for a trans-Pacific voyage has made economic sense only recently as North American demand and prices have soared for the relatively clean-burning fossil fuel.
A number of companies have recently started looking at ways to ship Russian gas to American shores. ChevronTexaco Corp., San Ramon, California, and Petro-Canada, Calgary, Alberta, have each said they are studying projects with Russian gas giant OAO Gazprom. Shell has a head start on many of its competitors, with a liquefied-natural-gas plant already under construction in Russia.
As part of the deal, a Shell affiliate will buy gas over 20 years from Sakhalin Energy, a Shell-led consortium operating an oil-and-LNG project on Sakhalin Island in Russia's Far East. The project is expected to begin LNG production in late 2007.
With the Mexican sales agreement, Shell has now locked up a little more than half of its expected LNG output at Sakhalin in firm contracts. The gas will be super-cooled at a facility at Sakhalin and shipped by tanker to a planned receiving terminal near Ensenada, Mexico, were it will be converted back into gaseous form. That plant, slated to be built by Sempra Energy, San Diego, is expected to have a processing capacity of some one billion cubic feet per day. Shell 's Russian supply to the plant will plateau at some 200 million cubic feet a day over the 20-year term of the contract, after significantly higher volumes in the first few years of the deal.
Write to Chip Cummins at chip.cummins@wsj.com