Shell Australia chairman Smith urges LNG industry to drop ego and collaborate

Angela Macdonald-Smith: Energy Reporter: 15 April 2016

Shell Australia chairman Andrew Smith is set to call on LNG industry leaders to drop their egos and get serious about collaboration to reduce costs, deliver better returns and improve competitiveness.

“We must put collaboration ahead of our industry’s natural desire to immortalise our own activities in concrete and steel,” Mr Smith will tell the LNG18 conference in Perth on Friday.

“Australia’s LNG industry will deliver greater economic value and better international competitiveness when we get better at the sharing of infrastructure on commercial terms.”

Mr Smith’s words are another sign that Shell is pushing for a more collaborative approach to bring gas in its Arrow venture in Queensland to market, using the existing equipment at the three operating LNG projects in Gladstone. Earlier in the week, Shell’s global chief executive Ben van Beurden also pointed to the potential for more efficient gas processing in Queensland, while Total SA boss Patrick Pouyanne said it was every company’s “duty” to co-operate to improve project economics.

The Shell Australia chair will point to the capital constraints plaguing the oil and gas sector, which makes collaboration even more important. Shell owns half of the Arrow venture with PetroChina, while it has recently taken over the Queensland Curtis LNG project through its takeover of BG Group.

“If we are to move from a construction boom in LNG, to a sustainable and successful industry, we must be clever in how we collaborate across the industry – all while driving greater innovation,” he will say.

Shell’s head of integrated gas, Maarten Wetselaar, told the conference on Thursday that innovation not just in technology but on costs and policy would be crucial to help the LNG grow. Putting a price on carbon would drive gas industry demand, as would policies to reduce marine emissions, which would make LNG an attractive fuel for shipping and open up a major new market for gas.

“One cruise liner with 7000 to 8000 people on board can use the same amount of fuel as a small city with a population of around 30,000,” Mr Wetselaar said.

Meanwhile, Neeraj Nandurdikar of Independent Project Analysis blasted the LNG industry for going ahead with projects that should never have been approved and for “dismal” performance on delivery.

He said LNG projects had returned on average a third less value than promised and some of the industry’s largest projects had eroded the most value.

“In fact, it seems that the larger the project is, the worse its outcomes are,” Mr Nandurdikar said.