Report: FLNG threat underestimated

The federal government has failed to give enough consideration to the economic and domestic gas supply implications of floating LNG technology (FLNG), a Western Australian parliamentary inquiry has found.

According to the economics and industry standing committee report tabled today, the production of liquefied natural gas on huge, purpose-built vessels stationed far offshore will marginalise many of the drivers of economic growth in WA.

"The use of FLNG technology as an alternative to onshore gas processing would negatively impact upon WA industry, while also undermining the state's domestic gas supply and public revenue base," the two-volume report said.

"The committee does not believe that the commonwealth government gave adequate consideration to these implications in so quickly supporting the proposed use of FLNG technology to develop Australian natural gas resources for export."

Australian Petroleum Production and Exploration Association chief operating officer Western Region Stedman Ellis said FLNG could not be ignored.

“We simply cannot afford to reject floating technology, because in some cases it may be the only viable means of developing some of our offshore gas,” Mr Ellis said.

He said WA had the opportunity to become a world leader in FLNG.

“We need also to recognise the substantial opportunities available to the local services sector through FLNG’s long operations phase,” Mr Ellis said.

“If we don’t seize this opportunity, others will.”

Shell, which is developing its Prelude FLNG project, said it acknowledged the findings of the report.

"We will continue to work cooperatively with both the federal and WA governments, industry and our joint venture partners to maximize the benefits of FLNG for Western Australia and for Australia," a spokeswoman said.

Engineers Australia welcomed the report.

“The report clearly identifies the challenges facing the engineering sector in WA, but also recognises that there are opportunities,” WA division deputy president Francis Norman said.

“While the facility will not be constructed in the State, there will be a significant demand for subsea engineering during the installation and commissioning phases and the operations phase will require access to a broad range of engineering services.”

The report also said it was essential that WA industry was able to take advantage of as many FLNG‐generated opportunities as possible.

"Project proponents have signalled an intention to use local content, and it is vital that project proponents, governments and local content providers work together to ensure maximum local content on all oil and gas projects,” the report said.

“Given the importance of local content, the Committee will be undertaking further work on the opportunities that could come from FLNG for WA and will table a separate report on this issue.” 

The report heard from 31 members of industry including Shell, Woodside Petroleum, Santos, GDF Suez Bonaparte, BP, ExxonMobil, ConocoPhillips, Inpex, Chevron, and various unions and peak body groups.

The national authority, NOPSEMA, declined to appear before the committee.