MARAD REJECTS SHELL'S LNG TANKER BUY PLAN

March 19, 1990

The U.S. Maritime Administration has rejected Shell International Petroleum Co.'s offer to purchase three liquefied natural gas tankers. The tankers, built with U.S. government subsidies, were designed to move Algerian gas to the U.S., but project sponsors defaulted, and Marad took possession of the tankers. Shell said Marad's decision could jeopardize the revitalization and growth of LNG imports from Algeria and Nigeria into mothballed East Coast and other U.S. terminals.

The U.S. Maritime Administration has rejected Shell International Petroleum Co.'s offer to purchase three liquefied natural gas tankers.

The tankers, built with U.S. government subsidies, were designed to move Algerian gas to the U.S., but project sponsors defaulted, and Marad took possession of the tankers.

Shell said Marad's decision could jeopardize the revitalization and growth of LNG imports from Algeria and Nigeria into mothballed East Coast and other U.S. terminals.

MARAD'S DECISION

In 1988, Shell signed an option to buy the tankers-Arzew, Southern, and Gamma-and designated three subsidiaries to receive them.

This month, Marad canceled that purchase option effective Apr. 5. It explained that U.S. law requires the tankers to be sold to U.S. citizens and the Shell subsidiaries, Argent Marine Services Ltd. companies, do not meet the citizenship requirement because they are controlled by a non-U.S. company.

Shell had intended to buy the tankers for about $12 million each. It planned to use two of them to import LNG from Algeria to the Cove Point, Md., terminal.

The third vessel would have transported LNG from Nigeria, where another Royal Dutch/Shell Group unit is involved in an LNG export plan (OGJ, Feb 26, p. 27). Shell said the economics of the project can withstand the loss of the Marad vessel.

Marad is considering selling the tankers to other parties.

Cabot LNG Corp., whose Distrigas unit operates an LNG terminal at Everett, Mass., sued Marad in an attempt to block the tanker sale to Shell, contending Marad should have accepted its offer over Shell's in 1988.

SHELL'S RESPONSE

Shell said it is evaluating contractual and other options to protect its position.

In addition, Shell said it was surprised and dismayed to learn of Marad's decision that the Argent companies had no U.S. citizenship regarding the option contracts to acquire the three LNG carriers.

The company contends that no Argent company, each incorporated in Delaware, was at any time under control by a non-U.S. entity.