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Shell to expand global LNG position with ~$6.2B deal with Repsol S.A.

Royal Dutch Shell plc has agreed to acquire part of Repsol S.A’s LNG (liquefied natural gas) portfolio outside of North America, including supply positions in Peru and Trinidad & Tobago, for $4.4 billion in cash. Shell will also assume and consolidate balance sheet liabilities predominantly reflecting leases for LNG ship charters of currently $1.8 billion. The balance sheet impacts are subject to final assessment prior to completion of the transaction.

The acquisition will LNG capacity in the West Atlantic from Atlantic LNG (ALNG) in Trinidad & Tobago, and in the East Pacific from Peru LNG (PLNG). These additions will complement Shell’s existing LNG capacity in Africa, Asia, Australia, the Middle East and Russia. The acquisition should add some 7.2 million tonnes per annum (mtpa) of LNG volumes through long-term off-take agreements, including some 4 mtpa of equity LNG plant capacity.

Shell expects to add value to this portfolio by optimizing the new LNG flows in its world-wide customer base. Subject to successful completion, the new portfolio is expected to immediately provide additional cash flow to Shell, with limited on-going capital expenditure requirements.

The transaction, which has an effective date of 1 October 2012, is expected to close in the second half of 2013 or early 2014, subject to regulatory approvals and other conditions precedent.

Shell has agreed to acquire from several Repsol subsidiaries which own key LNG businesses of Repsol. Upon completion, after securing regulatory approvals and meeting other conditions precedent, the transaction will add:

  • Net 4.2 mtpa equity LNG plant capacity comprising: ALNG trains 1-4 14.6 mtpa capacity, on a 100% basis (20-25% equity per train); Peru LNG 4.45 mtpa capacity, on a 100% basis (acquisition: 20% equity; 100% offtake); BBE power plant in Spain (25%, 800MW); operated by Bahía de Bizkaia Electricidad S.L.; and a fleet of LNG carriers, comprising both long term and short term time charters

  • A material LNG marketing and trading operation, with 7.2 mtpa of LNG volumes through long-term off-take agreements.

As part of this agreement, Shell has committed to supply around 0.1 mtpa of LNG to Repsol’s Canaport LNG terminal in Canada over a period of 10 years.

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