Shell to use FLNG for Kimberley projects

Western Australia is set to be the testing ground for Shell's new floating gas processing technology, with the company giving the go ahead for specific engineering work for the Prelude gas project off the Kimberley coast.

The petroleum company today said it is likely to develop the Prelude and recently discovered Concerto gas field, about 475 kilometres off Broome, using a floating liquefied natural gas vessel.

Shell had two months ago launched front end engineering and design (FEED) work for a generic FLNG vessel as part of a joint venture with Korean company Samsung, however executive director, upstream international, Malcolm Brinded said today the company was going ahead with the site specific FEED for Prelude.

But, Mr Brinded stressed that today's decision was not a final investment decision on the development of the Prelude project, which has been previously estimated by market observers to cost about $5 billion to develop.

Mr Brinded said a FID is likely to be more than 18 months away with first gas possibly produced at sometime in the middle of the next decade.

The company is currently working on environmental and production approvals for the Prelude project.

The vessel, which is about two-and-a-half times the size of the WACA oval, will be capable of producing 3.5 million tonnes of LNG, 1.3mt of condensate and 0.4mt of liquefied petroleum gas each year from Prelude for more than 20 years, Shell claims.

Weighing 600,000 tonnes, it would be the largest vessel in the world, Mr Brinded said.

Mr Brinded added the FLNG had many merits including 20 per cent lower carbon dioxide emissions and a lower cost of development for remote gas projects, including the Sunrise joint venture with Woodside.

"It would indeed be quite straightforward to also adapt [the FLNG vessel] for Sunrise and for Sunrise, this is one of two development options that are currently under review by Woodside as the operator on behalf of the JV partners," he said.

Mr Brinded said the company was also considering FLNG technology for the nearby Crux project, however it was dependant in the size of the resource.

Mr Brinded said he expected Shell would swiftly pursue other FLNG projects and would not wait until it had made a FID for the Prelude/Concerto operation.

"We'd be confident to move onto others," he said.

"We could move into FEED of others and that would have advantages ... in terms of rollover of crew in the (vessel) construction yard.

"The whole idea is not so much a production line but at least having them follow with a gap of maybe 12, 18 months.

"We'd like to see several of them moving over the next few years.

"We've got several (projects) in mind (for FLNG) and we're not yet identifying them but we do think that Australian acreage in particular, as well as African acreage, is suitable for this type of technology."

Mr Brinded said FLNG offered the chance to unlock gas resources "that would otherwise stay in the ground" because they were small or too far from shore.

The technology was set to revolutionise the development of remote gas fields in the same way oil production in deep water had exploded with the use of floating production, storage and offtake vessels, he said.

Gas fields could be brought on stream or abandoned quickly using FLNG technology, because the vessel could be deployed or re-deployed at whim.

Shell says it has spearheaded the decade-long global push towards FLNG production with a research budget that outweighs its competitors' budgets.

Santos is planning to use FLNG technology at its Evans Shoal, Barossa and Caldita gas fields about 300km off Darwin, a joint venture with French energy firm GDF SUEZ.

Also in the Timor Sea, Japan's Inpex has the same production plan for its Abadi field.

The announcement is below:

Shell today announced that it expects to develop its Prelude and Concerto gas discoveries, located in the Browse Basin off the northwest coast of Western Australia, using its innovative Floating Liquefied Natural Gas (FLNG) technology.

Shell's FLNG solution is an important development for the LNG industry, with its ability to process gas 'in situ' over an offshore gas field, reducing both project costs and the environmental footprint of an LNG development.

Shell is the Operator and 100% equity holder of the WA-371-P permit, containing the Prelude and Concerto fields, which would be developed sequentially. While pending a Final Investment Decision, the Prelude FLNG Project is now in the Front End Engineering and Design (FEED) phase of development. FEED for Prelude is being undertaken as part of Shell's contract with the Technip-Samsung Heavy Industries consortium for the design, construction and installation of multiple FLNG facilities.

Malcolm Brinded, Shell's Executive Director, Upstream International, said: "Shell is excited to be progressing with FLNG technology, which has the potential to unlock some of Australia's 'stranded' gas reserves that have previously been considered uneconomic to develop because of their small size or distance from shore. FLNG technology adds to Shell's LNG leadership - we are already the largest LNG marketer amongst the international oil companies, and are technical advisor to many of the world's LNG facilities."

Jon Chadwick, Shell's Executive Vice President - Australia, Upstream International, said: "I am delighted that we are planning for the first application of Shell's FLNG technology to be in Australia. This Project will produce LNG, Condensate and Liquefied Petroleum Gas during its 20-plus years of operation and it will contribute to Australia's economy through employment, tax revenue and business opportunities for Australians. This project is fast moving, with Prelude discovered in January 2007 and Concerto in March 2009."

Shell is currently working on the environmental and production approvals for the Prelude FLNG Project, with the draft Environmental Impact Statement soon to be released for public comment. This follows a successful drilling campaign in WA-371-P, in which all twelve commitment wells were drilled, with discoveries of the Prelude and Concerto fields.