Shell signs on to natural gas export project

A U.S. division of Royal Dutch Shell PLC said Monday that it has agreed to join a venture that plans to export liquefied natural gas from a terminal near Savannah, Ga.

Shell and pipeline company Kinder Morgan, which controls the company that owns an existing natural gas import terminal at the site, will form a joint venture to develop a facility that will chill natural gas to a liquid to prepare it for export.

The proposal is one of nearly two dozen similar ones, all hoping to export U.S. natural gas to Europe and Asia, where the fuel is two times to three times more expensive than in the U.S. Domestic natural gas prices have fallen dramatically in recent years as drillers have learned to tap underground shale formations that hold enormous reserves of natural gas under several states.

Shipping natural gas is expensive and difficult, however, because it must be chilled to 260 degrees below zero Fahrenheit before it is loaded onto a ship and sent abroad as liquefied natural gas, or LNG. Also, natural gas exports require regulatory approval because the fuel is so important to U.S. homeowners and businesses.

The terminal company, Southern LNG Co., applied for an export permit from the Department of Energy last March. The application is under review. It is one of 23 proposed liquefied natural gas export applications at the Energy Department seeking to export 31 billion cubic feet of natural gas per day, about half of current U.S. daily consumption.

Only one application to export gas to countries that are not part of free-trade agreements with the U.S. has been approved. The Obama administration has been weighing whether to approve more. Opponents fear that exporting natural gas will raise gas and electricity prices for U.S. homeowners and companies that are now benefiting from some of the lowest energy prices in the world. Environmental groups oppose export because they say it will increase drilling and harmful emissions.

Proponents argue U.S. reserves of natural gas are so large that the impact on price would be tiny, and they note that exporting natural gas will help reduce the nation's yawning trade deficit. Studies commissioned by the Energy Department to estimate the effect of natural gas exports on prices and the economy suggest that exporting gas would be beneficial to the economy, especially if exports are phased in slowly.

Shell, which is now producing more natural gas than oil, has been searching for ways to increase demand for natural gas. It is considering a new natural-gas-based chemical plant in Western Pennsylvania, it is developing cheaper ways of liquefying natural gas and it working on distribution systems to help make it easier for heavy trucks to convert from diesel to LNG. The proposed Georgia export facility would use Shell's liquefaction technology.