IHS Global Insight Perspective | |
Significance | Shell is expected to invest up to US$5 billion in the Prelude floating LNG (FLNG) plant, which is estimated to produce 3.6 million tonnes of LNG. |
Implications | This is a big step forward for those companies working in the floating LNG sector, who will now follow Shell's lead and look to develop gas assets that were, until now, regarded as uneconomic to monetise due to their remote and stranded location. |
Outlook | Shell and Technip-Samsung signed a contract for execution of the front end engineering and design (FEED) for the Prelude FLNG project earlier this year, but a final investment decision is not expected to be taken until 2011, with first gas expected in 2016. |
Prelude
Anglo-Dutch supermajor Shell, has said that it is pressing ahead with its Prelude floating LNG (FLNG) project off the coast of Australia, setting a date of 2016 for expected first gas from the project. The company is expected to invest up to US$5 billion in the Prelude plant, which is estimated, as Dow Jones reports, to produce 3.6 million tonnes of LNG, 1.3 million tonnes of condensate, and 400,000 tonnes of liquid petroleum gas (LPG). Shell's Prelude gas field, in the Browse Basin off the north-western cost of Australia, has reserves of around 3 tcf and is a classic example of a stranded gas asset that would be monetised if only its location were not so far offshore, or so far away from other LNG projects. Recently Shell announced it had made a significant gas discovery with the Concerto-1 well in its 100%-owned Block WA-371-P, close to its Prelude prospect, and this boosted the area's reserves. The Oil and Gas Journal reports that Shell plans to commence a two-year development drilling programme in 2013 that will see eight production wells drilled on its Prelude and Concerto gas discoveries.
The company has released a draft environmental impact assessment (EIS) for the area concerned, saying that the Prelude FLNG facility, if implemented, will not represent a significant risk to any listed or migratory species, threatened ecological communities, or the marine environment.
In August this year Shell's subsidiary Shell Gas & Power Developments BV signed a master agreement with a consortium comprising Technip and Samsung for the design, construction, and installation of multiple FLNG facilities over a period of up to fifteen years. Bloomberg reports that Shell plans to utilise a vessel "much larger than an aircraft carrier" for this FLNG project. Indeed, Malcolm Brinded, the company's executive director for international upstream business, has revealed that the vessel will weigh about 600,000 tonnes, and be around 480 metres long and 75 metres wide, designed to withstand a "one-in-10,000-year" tropical cyclone.
Outlook and Implications
Shell and Technip-Samsung have signed a contract for execution of the front-end engineering and design (FEED) work for the 3.5-million-t/y FLNG project, but a final investment decision is not expected to be taken until 2011. Once the Prelude project has been sanctioned its construction, in a South Korean construction yard, is expected to take almost five years, after which the vessel will be towed to its final location. Installation and hook-up is projected to take about six months from late 2015, and first gas production is expected to start the following year.
This is a major step forward for the FLNG sector, and for commercial gas reserves whose monetisation, due to their remote location, has in the past been regarded as uneconomic. FLNG offers new hope of developing these assets, as it would cost considerably less than constructing onshore liquefaction facilities. Brinded was quoted by LNG Unlimited as saying that there is enough gas in the acreage around Prelude to keep the planned 3.5-million-t/y facility full for more than 20 years.