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Shell’s Prelude LNG inches ahead amid talk of technical problems

Shell’s Prelude floating LNG project has taken longer than expected to start up.  Shell Australia

By Angela Macdonald-Smith: 01 Feb 2019

Energy giant Shell has brushed off persistent talk about technical problems dogging the start-up of the huge Prelude floating LNG project off Australia’s far north-west coast but has signalled the first LNG cargo from the closely watched venture may still be several weeks away.

The multinational announced the beginning of production from the offshore Prelude gas field in late December but is still in the process of commissioning the complex LNG processing systems on board what is the world’s largest floating structure.

Quizzed by reporters on “liquefaction problems” that have supposedly been encountered in the processing facility during the process to bring the project onstream, Shell’s head of integrated gas, Maarten Wetselaar, said Shell is “going through a very methodical process of turning on the midstream, section by section, and that’s progressing every day”.

He signalled Shell won’t be rushed on the start-up of Prelude, in which Japan’s Inpex Corporation, Taiwan’s CPC Corp and Korea Gas own stakes.”We will continue to focus on process safety and quality as we bring Prelude on in the weeks and months ahead,” Mr Wetselaar said in a briefing for Shell’s full-year results.

“The most important indicator on Prelude is the quality and speed of the ramp-up not so much a fixation on a particular start-up date, but so far progress is pleasing and we will turn it on when it’s ready to be turned on.”Still, one industry observer pointed to talk that technical problems have been found with the boilers in the 3.6 million tonnes a year LNG ship, by far the largest floating liquefaction project ever attempted. Some analysts are also convinced that the offshore gas reservoir at Prelude is connected with Inpex’s Ichthys field, which started up last year, meaning that reservoir pressure at Prelude is already on the decline.

Meanwhile, Shell reassured investors about the growth of gas demand in China, despite the economic slowdown in the world’s biggest growth market for the fuel which is also an important LNG buyer for Australian exporters.

Mr Wetselaar told investors in London that gas demand in China is “resilient” and isn’t dictated by economic growth but by policy, given the push to displace coal to clean up air quality. He noted that China’s gas markets grew by 16 per cent last year and energy imports by 40 per cent despite “mixed” economic growth.

“We believe there’s still a lot of replacement of coal displacement scope to go [in China] and elsewhere in Asia; we see a similar trend in India,” he said.

“It’s earlier days and policies are not yet as well matured and implemented as we see them in China. But starting so in India it’s about 4 per cent gas market growth, and leading to 10 per cent LNG import growth.

“So, I do think these markets still have a resilient growth ahead of them, that is to a large extent actually decoupled from their economic performance because of the displacement.”


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