- THE AUSTRALIAN
- APRIL 13, 2016 12:00AM
Matt Chambers: Resources reporter: Melbourne
Paul Garvey: Resources reporter: Perth
Shell chief Ben van Beurden has defended the company’s floating LNG program after the shelving of the Browse LNG project in Western Australia and calls from joint-venture partner Woodside Petroleum for Shell to use more advanced FLNG technology to reduce costs at the giant gasfields.
Shell is pioneering the use of floating LNG (FLNG) through the $US15 billion ($19.6bn) Prelude project, where the world’s largest vessel is being built to process gas from the Prelude field in the Browse basin.
But the shelving of Browse and Indonesia’s rejection of FLNG for the Abadi project last month have put the oil giant’s plans to roll out multiple versions of the giant floating gas freezers under a cloud.
“The fact we have not gone ahead with that project (Browse) at this stage as a consortium doesn’t mean the concept of floating LNG doesn’t work. It means the commodities cycle makes projects of that scale and that investment level uninvestable and unaffordable at this point in time,” Mr van Beurden said on the sidelines of the LNG18 conference in Perth. In other words, the project is a good one at long-term prices, but at current prices and resulting reduced cashflows the five Browse partners are not prepared to stump up the $50bn-plus needed to go ahead with the project.
Shell, which owns 27 per cent of Browse, sees the benefits of a big project with three floating LNG ships and has the balance sheet to cover it. But at operator Woodside, chief executive Peter Coleman believes better technology than Shell’s has evolved, meaning costs could be cut by 30 per cent.
Mr van Beurden said the technology did not need revising.
“What drives the decision around Browse is the dynamic around the economic cycle, not a reappraisal of the technology.”
Mr Coleman gave a slightly different assessment. “We need to think differently about Browse, and this just provides us an opportunity at this low point in the cycle to just sit back,” he said.
He called for the industry to share technology, rather than hide it behind intellectual property walls. “If you think about the technology that we’ve been trying to move forward (Shell’s technology), that was really the initial technology,” Mr Coleman said.
“What we need to bring forward are the very best ideas, not one that we’ve been able to keep to ourselves. FLNG today has already moved forwards in leaps and bounds, it’s already much more efficient than three or four years ago. That’s what we need to do as we look at Browse.”
Yesterday, Woodside signed a five-year charter contract with Norwegian company Siem Offshore Australia, which Woodside said would deliver Australia its first LNG-powered marine support vessel in 2017.