Shell said it will not proceed with its equity interest in the proposed Lake Charles LNG project, citing current market conditions. Its partner, Energy Transfer, will take over as project developer.

Shell said in a statement it will continue to support Energy Transfer's efforts with the bidding process for the engineering, procurement and construction contract, and then hand over the project's remaining activities.

"This decision is consistent with the initiatives we announced to preserve cash and reinforce the resilience of our business," said Maarten Wetselaar, director of Integrated Gas and New Energies.

Lake Charles LNG is a proposed 50/50 project between Shell and Energy Transfer that would convert Energy Transfer's existing import terminal to a liquefied natural gas (LNG) export facility in Lake Charles, Louisiana. The project has a proposed liquefaction capacity of 16.45 mtpa for U.S. natural gas export to global customers. Shell entered the project as a result of its 2016 combination with BG Group plc.

Energy Transfer said in a statement that it will evaluate alternatives to advance the project, including the possibility of bringing in one or more equity partners and reducing the project's size from three trains (16.45 mtpa of LNG capacity) to two trains (11.0 mtpa).

Energy Transfer owns the existing regasification facility that was built in 1982. The facility includes four LNG storage tanks, two deep water docks in the Calcasieu Channel and other infrastructure assets.

Shell earlier said it is reducing its 2020 capital expenditure to $20 billion, or below, from a planned level of around $25 billion, in addition to an operating cost reduction of $3 to $4 billion over the next 12 months.

Global oil markets have been hit by reduced demand due to coronavirus and to a crude oil production dispute between Saudi Arabia and Russia. That dispute has depressed world oil markets and forced a number of producers to cut capital expenditures.