Shell gets Dutch partner at one of UK’s three LNG terminals

With a deal with the London-based infrastructure manager Ancala, the Netherlands-headquartered energy infrastructure player VTTI, owned by Vitol, IFM Investors, and ADNOC, has put the wheels into motion to join the UK-headquartered energy giant Shell in Dragon LNG Group Limited, also known as Dragon LNG, the owner of a major onshore import terminal for the supply of liquefied natural gas (LNG) to the United Kingdom market.

VTTI’s agreement with the London-based infrastructure manager will enable it to acquire the latter’s entire shareholding totaling 50% of Dragon LNG, which is currently owned by Shell (50%) and Ancala (50%). This regasification terminal is one of the three LNG terminals in the UK and the news about the change in ownership comes after an active period in which LNG volumes through the terminal increased by approximately three times.

Simon Ames, Managing Director of Dragon LNG, commented: “The Ancala team has been a valued partner and played a critical role in our work to enhance our terminal operations and accelerate our energy transition strategy. They have brought fresh thinking to unlock new opportunities and make improvements across the business. The terminal is in an exciting position to expand its role in contributing to the UK’s energy security and affordability whilst decarbonising our own Scope 1 and Scope 2 emissions.

“We are also well positioned to be part of the wider decarbonisation within the Milford Haven industrial cluster and as the UK’s leading energy port. We work closely with the port, other industries and the local community to ensure we maximise the benefit we bring to the local economy and the broader UK pathway to net zero. We’re looking forward to what we can achieve in the future with Shell and VTTI.”

Located near Milford Haven in Wales, Dragon LNG consists of LNG receiving, storage, reliquefication, regasification, and send-out facilities, which can achieve maximum gas send out to the UK national transmission system of up to 9 billion cubic meters, supplying approximately 10% of Britain’s annual gas demand.

According to Ancala, Dragon commissioned a reliquefaction plant which makes the terminal Europe’s only zero send-out regasification plan,t affording terminal users significant flexibility to reliquefy boil-off gas. While the transaction is subject to customary conditions and is expected to close in 3Q 2024, no financial details of the transaction have been disclosed.

Lee Mellor, Partner, Ancala, remarked: “Dragon has been another successful investment for Ancala and evidences our proactive approach to create value whilst delivering downside protection for our investors. Our investment thesis was based upon the growing importance of LNG to the UK’s energy mix and in delivering further improvements to the site’s operations and to Dragon’s sustainability journey.

“We’re pleased to have helped the team deliver on this while providing a step-change in Dragon’s capabilities and developing exciting new opportunities for the business. We would like to thank the Dragon team and Shell for the excellent collaboration and partnership over the past five years and wish them, together with VTTI, every success on the exciting journey ahead.”

Furthermore, Dragon Energy Limited, a fully owned subsidiary of Dragon LNG Group Limited, has also commissioned a 10 MWp solar farm at the facility and is developing additional renewable power projects at the site in support of decarbonizing Scope 2 emissions at the LNG terminal. Ancala claims that the solar park reduces Dragon’s Scope 2 carbon emissions by around 2,500 tons per year and provides renewable energy to local businesses.

In addition, a planning application for a 13 MWp wind farm has been submitted, thus, the renewables projects are expected to supply a significant part of the terminal’s demand for power with self-produced, green electricity, with further plans in place to do more in the future.

Moreover, Dragon is also currently working in partnership with RWE to explore the construction of a multi-utility services transit (MUST), which will connect industry across the Milford Haven Waterway and is a key component of the UK’s pathway to net zero, supporting the decarbonization ambitions of the South Wales Industrial Cluster.

Guy Moeyens, CEO of VTTI, highlighted: ‘’As part of VTTI’s Strategy 2028, we are committed to expanding and enhancing LNG regasification infrastructure globally. Our aim is that half of our portfolio will be in transitional and sustainable energy sources by 2028.

“Following the recent agreement in Italy to acquire a 70% equity stake in Adriatic LNG in Italy and the ongoing development of a new LNG import facility in Vlissingen in the Netherlands, this acquisition reflects our commitment to diversify into LNG as a transitional energy source.”

VTTI has explained that it has a long-term strategic view on the terminal, furthering the opportunities for decarbonization of the regasification process and continuing to provide safe and secure, long-term access to the UK gas market.

“We are looking forward to partner with Shell to ensure that Dragon LNG continues to operate in a safe and reliable manner while accelerating its decarbonisation and growth path,” emphasized Moeyens.

Earlier this month, Dragon LNG awarded a contract to Worley to conduct a comprehensive feasibility study, focusing on exploring the potential benefits of integrating LNG regasification and CO2 liquefaction processes at its facilities.

If it turns out to be feasible, the technology at Dragon would support wider collaboration with RWE Pembroke Net Zero Centre, whose CO2 would be transported to the Dragon facility for processing before being shipped via non-pipeline transport (NPT) to carbon sequestration sites.

By exploring the integration of LNG regasification and CO2 liquefaction processes, the firm aims to pave the way for a cleaner, more efficient energy future with its ambition of a net zero terminal by 2029.