24/08/2020 - 15:03

$2bn estimate for Gorgon, Prelude stoppages

24/08/2020 - 15:03

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The shutdown of Shell’s Prelude FLNG since February and planned phased shutdowns at Chevron’s Gorgon could hit LNG exports by about $2 billion this year.

Shell's Prelude FLNG vessel has been shutdown for much of the year. Photo: Shell

The shutdown of Shell’s Prelude FLNG since February and planned phased shutdowns at Chevron’s Gorgon could hit LNG exports by about $2 billion this year.

The Prelude floating LNG processing vessel has been out of action for nearly six months, and weld problems were revealed in Gorgon’s Train 2 propane tanks in July.

Last week, the state government announced a phased shutdown of the alternative two Gorgon trains for Chevron to inspect heat exchangers.

Wood Mackenzie senior research analyst Daniel Toleman expected Gorgon would produce at about 80 per cent to 85 per cent of its 16million tonne per annum capacity in 2020.

The long shutdown of Prelude would mean LNG production this year of only about 0.6mt, Mr Toleman forecast.

Prelude’s capacity is 3.6mtpa.

Mr Toleman said it was a reasonable estimate that combined, the shutdowns would reduce export revenue by about $2 billion.

To give an idea of the scale of the industry, WA's LNG sales were $27.4 billion in 2019.

But despite the setbacks, he said the projects would operate over a long life and produce jobs and tax for Western Australia.

“These are large, complicated facilities,” Mr Toleman said.

“Operators do turnarounds to look for issues and (fix) issues.”

Prior to the shutdown, Prelude had been operating well, he said, and should be back online in September.

Problems at Prelude have included power generation, and plumbing.

In August 2018, there was a total loss of power at the facility, according to documents from the National Offshore Petroleum Safety and Environmental Management Authority.

Business News understands that restart of Prelude is under way.

A spokesperson for Shell said the company’s focus was on a safe and stable facility.

“Prelude is a multi-decade project and its success will be measured by delivering sustained performance over the long-term,” the spokesperson said. 

“Prelude forms an integral part of our global portfolio and plays an important role in meeting the growing demand for more and cleaner energy for our customers around the world.

“Natural gas and LNG are expected to continue to experience strong long-term demand as the world tackles climate change, poor air quality and population growth in the decades ahead. 

“Those drivers remain the same and, despite the current challenges from COVID-19, in our view the long-term trajectory we are on when it comes to the global energy transition has not changed. 

Shell takes a long-term view of our assets and we will continue to invest in future energy supply where we see long term demand.”

Industrial battle

A further challenge for Shell will be industrial relations disputes at Prelude.

Catering workers employed by contractor Sodexo have been striking in recent weeks; most employees in that dispute are on the Prelude platform.

Maintenance workers employed by Monadelphous subsidiary M&ISS are also being balloted for potential industrial action.

Both are represented by the Offshore Alliance, a joint effort by the Australian Workers’ Union and the Maritime Union of Australia.

AWU WA branch secretary Brad Gandy said the alliance believed Shell was pressuring Sodexo to reject the terms offered so far in the negotiation.

“The negotiations between the Offshore Alliance and M&ISS Pty Ltd are also stalled due to what appears to be interference from Shell,” Mr Gandy said. 

“Members of the Offshore Alliance are currently voting on taking industrial action onboard the Prelude. 

“We expect members will endorse taking industrial action.”

A Shell spokesperson said the company values its contractor workforce and their wellbeing, but the negotiations were a matter for parties in the negotiation.

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