Shell’s development of a world-first floating LNG project off the Kimberley coast is likely to be a game changer for the industry, allowing extensive ‘stranded’ gas assets to be developed.
Shell formally approved the $12 billion Prelude floating LNG project in May last year, after years of development work.
It is aiming for production start-up in 2017, about 10 years after the gas field was discovered.
At least three more FLNG projects off Western Australia’s northern coast are being evaluated, based on relatively small gas fields in remote locations, and many more are likely to proceed in other parts of the world.
The key to all of these projects is the ability to build a large and complex gas liquefaction plant, along with storage and offtake facilities, onboard a tanker.
The scale of Prelude’s FLNG facility illustrates the magnitude of the task. It will be about 488 metres long, 75m wide and will measure 17 storeys high. The complex technology to be deployed on Prelude includes a ballast system that will allow the vessel to stay at sea, even during cyclones, and will stabilise the vessel during offloading to tankers.
Since making the final investment decision last year, Shell has been working on detailed design.
It started construction last September on the well heads and this year will start construction on the world’s largest turret.
The keen interest in the project was highlighted by recent agreements to sell a combined 32.5 per cent interest in the project to Japanese company Inpex (17.5 per cent), Korea’s KOGAS (10 per cent) and Taiwan’s CPC (5 per cent).
Each of these groups is likely to become a customer of Prelude, which will have annual output of 3.6 million tonnes per year.
For Inpex, the investment has added strategic value, because it is looking to use FLNG technology for its Abadi LNG project in Indonesia.
In addition, Shell has been negotiating with Melbourne company Nexus Energy, to finalise a deal that will see the Crux liquids project integrated with Prelude.
Nexus has spent the past few years pursuing the stand-alone development of Crux.
That changed in January, when it announced a heads of agreement that would result in Shell acquiring an 80 per cent interest in Crux and processing the gas through the Prelude FLNG plant.
Separately, a floating production, storage and offloading (FPSO) vessel would be used to produce and offload the Crux condensate.
Nexus announced this week that the terms of the agreement have been extended by a month to the end of May, to allow documentation to be finalised.
Timor Sea projects
Other FLNG projects that are being evaluated include the Bonaparte, Sunrise and Cash-Maple developments.
French company GDF Suez and its Australian partner Santos are expected to make a final investment decision on their Bonaparte project, in the Timor Sea, in 2014.
It is most likely to proceed as a relatively small FLNG development with output of 2mtpa, starting in 2018. Also in the Timor Sea, Thai company PTTEP Australia is evaluating its Cash-Maple gas and condensate field.
PTTEP is undergoing a concept selection study for Cash-Maple this year. The company has stated that its development options include a FLNG plant.
It expects the study to be completed by the third quarter of this year and be integrated with the results of the Maple-2 appraisal well.
The Sunrise development has been delayed by disputes between project operator Woodside and the government of Timor-Leste.
Timor-Leste wants to see the LNG plant built on its territory to maximise economic and financial spin-offs but Woodside says that would add enormously to the technical complexity and cost of the project.
That’s why it has selected a FLNG plant, producing 4mtpa, as its preferred option.
Woodside chief executive Peter Coleman met with Timor-Leste prime minister Xanana Gusmao in February, as part of a year-long effort to rebuild the relationship.
The company said further engagement with the Timor-Leste government is scheduled in the coming months “to work towards a mutually beneficial development outcome”.
Local content limits
The nature of FLNG projects means there is limited scope for Australian industry participation, though Shell is working with the Industry Capability Network to find local opportunities on Prelude.
Most of the engineering is being done by Technip, which is based in Paris, and Korea’s Samsung Heavy Industries is handling most of the construction, in part because Korea is one of the few places with sufficiently large shipyards.
One of the opportunities Shell is targeting in Australia is the training of FLNG plant operators.
One local business that will benefit is Mermaid Marine, which has been contracted (through its Toll Mermaid venture) to provide supply base and logistic support services.
Mermaid operates a large supply base at Dampier, which services many offshore oil and gas projects, and has a second facility at Broome to service the Browse Basin projects, such as Prelude. The oil and gas sector’s strong growth helped Mermaid deliver a record profit of $27.6 million in the half year to December 2012.
