Shell Boosts Bet on North American LNG Exports

        Shell Boosts Bet on North American LNG Exports 

Royal Dutch Shell and Energy Transfer stated that they are making plans to convert a liquefied-natural-gas import facility in Louisiana (Lake Charles) to an export terminal.  By doing this, many are expecting the future of U.S. shale gas lines to sell for higher prices in overseas markets.  Together, the two companies recently put contracts out for bid to engineers and construction companies to reconfigure Energy Transfer's existing import facility in Lake Charles.  The proposed facility brought to the table would have the capacity to ship 16.5 million tons of U.S. natural gas per year.  Shell's director of integrated gas and new energies, Maarten Wetselaar, believes the best way to find the proper location for this facility, is "to go out to tender and get a price that someone is willing to commit to."  This decision has become a strong desire due to the prolonged period of low natural-gas prices in the U.S.  The futures for April recently came out, stating the price at $2.755 per million British thermal units.  Although this is up 5% from a year ago, it is still low enough to put financial pressure on the producers that have flooded the domestic market with shale gas in recent years.  Both Shell and Energy Transfer own equal economic stakes in the Lake Charles project, which was built when many believed the U.S. was running low on gas and would rely on imports.  The partners will soon decide on whether to make this significant move, however, the challenge comes from the amount of people needing to be hired,in order to make this successful.  It has been estimated that nearly 5,000 workers will need to be hired between the two companies to build the export facility.  It is also evident that this task may be hard to accomplish, as competitors Exxon Mobil and Qatar Petroleum have announced they will build a rival export terminal nearby in Texas.  Mr. Wetselaar still feels confident that Shell and Energy Transfer "have advantages over competitors because much of the necessary infrastructure has already been built."  U.S. liquefied natural gas (LNG) exports have surged since early 2016.  China has recently emerged as a key buyer of U.S. gas as the country combats air pollution by replacing coal-fired power plants with those that produce electricity from cleaner inputs, such as natural gas, wind and solar.  Last year, Shell accounted for nearly a quarter of all LNG sold globally and has already partnered with several large Asian investors to build a $30 billion LNG export facility in British Columbia, which will gather and transport gas from western Canada to markets abroad.  With the experience both Shell and Energy Transfer have, not only with export facilities, but also with investors abroad, the future is bright and with Shell's recent $50 billion purchase of BG Group PLC, a major player in LNG markets, this Lake Charles project is only one of many to come.

This article relates to the marketing concept because it is focusing on how two major partners in the oil and gas industry, Shell and Energy Transfer, are expanding their target market and segmenting to different areas.  Shell currently has LNG plants in many different countries around the world, however, the article is explaining that they are segmenting to even more parts of the world.  From going to British Columbia, to Lake Charles, to possibly China, the company is drastically expanding its target market.  In doing so, Shell is observing its external market environment, which is why the company has made significant deals, such as purchasing the BG Group PLC, as well as an export facility which will gather and transport gas from western Canada to markets abroad.  Furthermore, before starting their most recent project in Lake Charles Louisiana, Shell compared their situation to those of their competitors.  In comparison to Exxon Mobil and Qatar Petroleum, Shell understood they had a significant advantage due to necessary infrastructure already being built.  By taking into account all of this consequential information, Shell, along with Energy Transfer, has positioned themselves into another success pit where they can once again persevere in dominating the oil and gas industry.

I chose this particular article because the oil and gas industry has always fascinated me.  Not only does this industry lead to endless amounts of success for our economy, but the products made are used in so many things that we use on a daily basis.  For years, I have followed many of the different oil companies in striving to determine which one has the best products.  I have enjoyed comparing the products of each company and being able to witness the advantages and disadvantages of each.  This industry is essential, to not only our economy, but also our country.  This is one of the many sectors the United States strongly leads in and I cannot wait to see what the future holds for the many companies in this industry.


Link: https://www.wsj.com/articles/shell-boosts-bet-on-north-american-lng-exports-11553534641