Shell drops its plan to build much-reviled offshore LNG terminal

The Shell Oil Co. said last Wednesday it was nixing plans to build a liquefied natural gas terminal in the Gulf of Mexico that had become a symbol of environmental degradation for fishermen and government officials.

Shell said its decision to disband plans for Gulf Landing LLC was based on market considerations and not a reaction to the bad publicity it had received in Louisiana and other Gulf states.

“The terminals that have already been committed will provide sufficient (LNG) capacity,” said Greg Koehler, the project director for Gulf Landing.

Instead of building its own terminal, Shell will rely on others both onshore and offshore to transport LNG into the Gulf and it may opt to buy capacity rights at other facilities, Koehler said.

Shell’s pull out leaves four terminals on the drawing board in the Gulf and only one that is actually receiving shipments of LNG, Excelerate Energy’s Gulf Gateway Energy Bridge.

Koehler said the Gulf Landing team has been dismantled and that the company has informed the U.S. Coast Guard and the U.S. Maritime Administration of its decision regarding the terminal, which was to be located about 36 miles off the coast of Cameron Parish in southwest Louisiana.

Gulf Landing got a license to build the terminal in February 2005, but news of the permit was greeted with an outcry because Shell planned to use millions of gallons of Gulf water in its process to warm the super-cold LNG back into gas.

Opponents have argued that this method of using Gulf water, called an “open-loop system,” would kill zooplankton and fish larvae in the water, and put in even greater jeopardy stressed species like the red snapper. Instead, LNG companies were urged to use gas in a “closed-loop system.”

By April of 2005, a small but indignant crowd of sunburned fishermen joined environmental activists in a protest outside the Shell building in downtown New Orleans. Holding signs that read “No Fish For Fuel” and “Stop The Shell Game,” the Gumbo Alliance campaign was born.

Since then, the campaign has reeled in support from Gov. Kathleen Blanco, who joined other Gulf governors in pledging to veto terminals using the open-loop system, and the average fisherman wary of losing precious fishing stock to the oil and gas industry.

The groups in the campaign also filed an unsuccessful lawsuit to stop Shell from moving forward with Gulf Landing.

“I’m not one to holler about snail darters and spotted owls,” said Charlie Smith of the Louisiana Charter Boat Association, a key fishing group in the Gumbo Alliance, distancing himself from the green movement in general. “But I am drawn to empirical data that shows there is damage.”

Koehler said the PR campaign against Shell was not a factor “in our decision to stop development activities.” And he maintained that Shell still believes that an open-loop system would have been “the best option.”

So far, there has not been an independent academic study comparing the two different methods for heating LNG. Meanwhile, the National Marine Fisheries Service has said open-loop terminals would be harmful.

Aaron Viles, campaign director for the Gulf Restoration Network, an environmental group with the Gumbo Alliance, said Shell’s announcement “was exactly the right decision for the Gulf of Mexico.”

In his estimation, the campaign was successful.

“Whether it was the lawsuit or whether it was the public relations effort, Shell wasn’t able to move forward as quickly as they would have liked to, and I think they lost their edge in getting into the marketplace as quickly as they would have liked to,” Viles said.

Of three proposed offshore facilities in American waters in the Gulf, only one, McMoRan Exploration Co.’s Main Pass, has agreed to use closed-loop technology while the only existing one, Excelerate’s, uses an open-loop system, Viles said. Viles said he has not been able to determine what kind of technology is planned for a terminal off the coast of Mexico known as Altamira.

Shell, a partner in that Mexican venture, said the project will use open-loop technology.

Shell Oil Co. is terminating plans to build a liquefied natural gas terminal in the Gulf of Mexico, saying terminals that have already been committed will provide sufficient LNG capacity.