No regulatory hurdle in Prelude floating LNG restart but Shell noncommittal on timeline

Singapore — Royal Dutch Shell remained reserved about setting a timeframe for resuming LNG shipments from its Australian Prelude floating LNG facility even as authorities said there were no regulatory issues left that were preventing Shell from doing so.

There have been no exports from Prelude FLNG, Shell's flagship floating liquefaction plant offshore Australia, for more than four months now after an electrical trip forced production to be put on hold in early February.

This is after an already delayed restart of the project in 2019, when it was only operational for a few months, although depressed market conditions for LNG mean that now is probably a good time to be offline.

"The utility systems on the facility have been safely restarted and the focus is now on the process for hydrocarbons restart," a Shell spokesman said via email late June 16.

"Our focus remains on a facility that is safe, robust and reliable, and we are working to restart production with that in mind," he said.

Prelude, which combines an upstream gas production facility with a liquefaction plant, has been plagued with technical issues since its 2018 startup, when its towing lines failed during berthing operations of its first LNG carrier.

In January 2020, Shell received a direction from the National Offshore Petroleum Safety and Environmental Management Authority, or NOPSEMA, regarding work activities on Prelude after which Shell ceased certain plant and equipment activities while a review was undertaken.

Shell first announced the Prelude suspension on February 4.

However, NOPSEMA said late June 16 that the current shutdown of Prelude is not at the regulator's direction, and the duration of the outage is a matter for Shell.

"The accepted safety case for Prelude covers all aspects of its operations, including shutdowns and restarts. Given the shutdown of production was not due to regulatory action taken by NOPSEMA, the re-start of production will not require 'regulatory sign-off' as such matters have already been addressed in the accepted safety case," a spokeswoman for the regulator said.

Safety inspections

There have been three notifications of dangerous occurrences at Prelude since September 2019 that its inspectors attributed to deficiencies in the safety management system that "relate to the safe isolation of plant and equipment," according to NOPSEMA's letter to Shell seen by S&P Global Platts.

These incidents happened on September 18, 2019, December 10, 2019, and January 9, 2020, and were related to the "loss of hydrocarbon containment" that set off gas detectors on the unit.

"The events of late 2019 and early 2020, and the findings from the associated investigations, led the NOPSEMA inspectors to the conclusion that risks associated with conducting intrusive activities at the Prelude FLNG facility, were not being reduced to as low as reasonably practicable, and that there was a significant risk to the health and safety of persons at the facility," the letter said.

On March 20, NOPSEMA extended the due date for Shell Australia to fully comply with directions to May 31 "due to extenuating circumstances associated with measures put in place to mitigate the spread of the COVID-19 virus."

Shell operates the Prelude FLNG, located 475 km from Broome in Western Australia, with a 67.5% stake, while Japan's Inpex holds a 17.5% stake, South Korea's Kogas 10%, and Taiwan's CPC Corp. 5%.

The project has a production capacity of 3.6 million mt/year of LNG, 1.3 million mt/year of condensate, and 400,000 mt/year of LPG.