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Shell ships first LNG cargo from Prelude FLNG project in Australia

Singapore — Shell has shipped its first LNG cargo from the Prelude floating liquefied natural gas or FLNG facility offshore Western Australia, on the vessel Valencia Knutsen to customers in Asia, the oil major said Tuesday in a statement.

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The shipment marks the startup of one of the most anticipated LNG projects in the world and will boost Australia's LNG export volumes as it ramps up capacity in coming months.

"Today's first shipment of LNG departed from Prelude FLNG, safely," Shell's Integrated Gas and New Energies Director Maarten Wetselaar said. "Prelude forms an integral part of our global portfolio and plays an important role in meeting the growing demand for more and cleaner energy for our customers around the world."

Prelude FLNG will produce 3.6 million mt/year of LNG, 1.3 million mt/year of condensate and 0.4 million mt/year of LPG at full capacity. It is operated by Shell with a 67.5% interest in a joint venture with Japan's Inpex with 17.5%, South Korea's Kogas with 10% and Taiwan's Overseas Petroleum and Investment Corp with 5%.

Prelude started gas production from the wellhead in December 2018 and began shipping condensate in March 2019.

"The first [LNG] cargo was more than eight years after FID and nearly two years after the facility arrived in Australia. How fast Prelude delivers its second and third cargo, and ramps up to plateau output, will be a key indicator of success," Wood Mackenzie senior analyst Daniel Toleman said.

"The Prelude facility will be backfilled by Crux, which entered FEED this year. We expect a FID late next year with first production in 2025," Coleman said. He said Shell will spud the Bratwurst exploration well later this year and if a significant gas resource is discovered, it is likely to be developed via the Prelude facility.

Inpex said it will supply its equity portion of LNG from Prelude at plateau production to trading company JERA and Shizuoka Gas, at 0.56 million mt/year and 0.07 million mt/year respectively, contributing to stable energy supply to Japan. It expects Prelude FLNG to have a minimal impact on its financial results for the fiscal year ending December 2019, but expects it to add to revenue and cash flow for the fiscal year ending December 2020.

"With Prelude on stream, Australia is on track to export more than 80 million mt/year of LNG, which surpasses Qatar as the largest LNG producer in the world," Coleman said, adding that the project marks the end of the Australian greenfield LNG boom.

--Eric Yep and Takeo Kumagai, newsdesk@spglobal.com

--Edited by Wendy Wells, wendy.wells@spglobal.com