- Developer Energy Transfer and Shell signed a project framework agreement this week that puts the two closer to building an LNG export terminal next to ET’s existing import and regasification facilities in Lake Charles, Louisiana. Industry sources have estimated that the cost of the project will be between $12 billion and $16 billion.
- The Lake Charles project is a 50-50 partnership between the two companies, and Shell will act as construction manager and operator after the final investment decision is made. A factor in that decision will be the outcome of the engineering, procurement and construction (EPC) bidding process, which is expected to start within the next few weeks. The project is fully permitted, so construction could start as soon as Shell and Energy Transfer select a contractor.
- If the companies move forward with the project, it is expected to create at least 5,000 jobs during the construction phase. In the Federal Energy Regulatory Commission’s (FERC) December 2015 Final Environmental Impact Statement (FEIS), they expect to spend $4.4 billion on construction of the liquefaction facility portion — $1.7 billion for goods and services and $2.7 billion on wages — including $325 million on materials and supplies.
As part of the export terminal project, Shell and ET plan to build three liquefaction trains; make modifications and upgrades to the existing terminal facilities; construct a small feed gas line and 18 miles of natural gas pipeline line; build a new compressor station; construct five new meter stations; and make various other improvements.
LNG projects on the scale that Shell and ET are proposing always end up costing billions of dollars, but, like the Lake Charles project, only a portion of the mega price tag represents construction costs.
The Tellurian Driftwood LNG project, for instance, has a total approximate value of more than $27 billion. However, in its FEIS from FERC, construction costs are estimated at $14.5 billion, and its turnkey EPC contract with Bechtel, also a Tellurian investor, is for $15.2 billion. The Tellurian project includes construction of three LNG storage tanks, three marine berths, almost 90 miles of pipeline, three compressor stations and other structures.
Another example of how construction costs are far less than the total value of big LNG projects is the Golden Pass LNG expansion project in Sabine Pass, Texas. ExxonMobil and Qatar Petroleum have valued the entire undertaking at $10 billion, but the project’s FEIS estimated that the two will spend approximately $3.7 billion on construction, including $2.7 billion on materials and services and $1 billion on labor.