Finance Finance News Shell says floating LNG technology up to 50 per cent cheaper than onshore development

Shell says floating LNG technology up to 50 per cent cheaper than onshore development

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Shell has revealed floating LNG processing platforms can be 30 to 50 per cent cheaper to construct than onshore facilities.

Onshore developments includes pipelines from the field to shore, port facilities and a land based gas plant.

Floating platforms avoid the need for a pipeline or port facilities.

While floating technology has fewer upfront capital costs, offshore facilities are more expensive to operate.

Shell’s country chair in Australia, Andrew Smith, says the difference in upfront capital costs more than offsets the difference in operating costs over the life of the project.

He was giving evidence to a parliamentary inquiry in Perth into the economic impacts of floating LNG.

Difference between offshore versus onshore jobs questioned

Shell is building the first floating LNG platform to exploit the Prelude gas field off Western Australia.

It plans to use the same technology to develop the Browse Basin off the Kimberley coast after the Woodside-led consortium, which it is part of, abandoned development at James Price Point because of escalating costs.

Mr Smith said FLNG gave the Browse project an option for development.

“FLNG allows for significant cost reduction which made the difference between a project that was economically unviable to one that was economically viable, Mr Smith said.”

In prior hearings for the inquiry this week, the committee revealed it had figures which showed the rate of return between the onshore and offshore development options for Browse only differed by about one per cent.

The committee’s Fran Logan said a submission from another un-named organisation stated James Price Point provided an 11.5 per cent rate of return while floating LNG provided 12.5 per cent.

But today, Mr Smith disputed the claim, saying he does not recognise the figures which have been spoken about.

Meanwhile, Shell refused to quantify how many construction jobs the onshore development would have created for WA.

The committee asked the company to quantify the difference between offshore versus onshore development.

Mr Smith said James Price Point wouldn’t have created any jobs because the project simply wouldn’t have gone ahead.

Prelude the first to use floating LNG technology

The Prelude project off the WA coast will become the first field in the world exploited using floating LNG technology.

The platform is currently being built in Korea with other specialised infrastructure being built elsewhere overseas.

Mr Smith said while the construction and design is happening offshore, most of the operational jobs will be given to Australian workers.

Shell anticipates the project will create 350 direct jobs and 650 indirect positions, more than 70 per cent of which it says will be given to local workers.

Shell is expected to reveal the rate of return figures and the capital cost difference for the Browse Project in a closed hearing with the committee.

The inquiry continues.