Kinder Morgan Inc. will buy out Royal Dutch Shell PLC’s interest in their proposed Elba Liquefaction Co. (ELC ) joint venture in Georgia.
Houston-based Kinder Morgan already owns 51% of the ELC joint venture. The firm said it would buy the 49 percent stake that it does not already own in the natural gas joint venture and it raised its dividend.
ELC owns the Elba Liquefaction Project, which is proposed to be constructed and operated at the existing Elba Island LNG Terminal near Savannah, Georgia.
Kinder Morgan expects to invest an additional $630 million in the joint venture as a result of the transaction, bringing its total investment to $2.1 billion. Construction is expected to begin in the fourth quarter, with initial production to begin in late 2017.
Shell still has a 20-year contract subscription to the terminal’s 2.5M metric tons of annual export capacity.
Shell and Kinder Morgan created the joint venture-to export liquefied natural gas from an existing import terminal near Savannah, Ga.-in January 2013. The deal adds to energy-sector efforts to capitalize on North America's newly found abundance of natural gas from shale.
“We are very pleased to purchase Shell’s equity interest in the joint venture and advance the project with Shell’s continued support and subscription to 100 percent of the capacity of our world-class Elba Island terminal,” said Kinder Morgan East Region Natural Gas Pipelines President Kimberly S. Watson. “We look forward to this additional investment opportunity that provides attractive returns and that serves a high-credit quality customer in Shell.”
“This is a good opportunity to leverage the proven track record of both companies to deliver an innovative LNG export project in the United States,” said Ton Ten Have, Shell Upstream Americas VP LNG Operations and Growth. “Shell and Kinder Morgan have successful relationships in North America based on Kinder Morgan ownership with Shell as a customer and we believe this will be a successful model at Elba as well.”
The latest acquisition helps bring Kinder Morgan’s current backlog of expansion and joint-venture investments to $22 billion, compared with $18.3 billion in the first quarter.