Shell shelves Aphrodite offshore gas project in Trinidad for now

By Curtis Williams

Aug 24 (Reuters) - British oil major Shell has shelved its Aphrodite offshore gas project in Trinidad and Tobago after disagreements over commercial terms with Trinidad's National Gas Company, three people familiar with the decision said on Monday.

Shell had given the project a positive final investment decision last year, but it has decided for now not to proceed with the development after negotiations with NGC for the sale of the project's expected output of around 100 million cubic feet per day of natural gas failed, the sources said.

NGC acts as Trinidad's gas aggregator, purchasing from producers and supplying it to downstream users, including the petrochemical sector and the country's flagship liquefied natural gas project, Atlantic LNG, where Shell is a 45% shareholder.

As part of its decision, Shell has released a jack-up rig it had contracted to drill the production wells for the project, the people said.

"Shell is in ongoing negotiations and confirms that the initial rig slot for Aphrodite has been released," Shell told Reuters.

The company will continue to evaluate the overall integrated project schedule, it added. NGC did not respond to a request for comment.

Trinidad is the largest LNG exporter in Latin America. The decision represents a setback for the Caribbean country's efforts to reverse years of declining natural gas output, which has curtailed its LNG exports and petrochemical production.

The Aphrodite project's anticipated production would have provided a modest but welcome boost to the island's gas supplies.

Industry participants have increasingly pointed to commercial challenges, including gas pricing, as being responsible for the recent closure of several petrochemical plants on the island.

Trinidad expects to soon have access to gas from neighboring Venezuela as Shell and BP advance plans to produce there, which would complement domestic output.

Both companies have been granted licenses by the Venezuelan government related to cross-border gas developments expected to allow Venezuelan gas to be produced and transported to Trinidad for processing and export. Those projects are viewed as critical to replenishing supplies to Atlantic LNG and supporting the country's energy sector over the coming decade.

(Reporting by Curtis Williams in Houston; Editing by Marianna Parraga, Lisa Shumaker and Sonali Paul)