US energy giant Chevron says there are unanswered questions over the use of floating liquefied natural gas technology to develop remote gas fields.
Chevron Australia managing director Roy Krzywosinski has told a Western Australian parliamentary committee that floating LNG technology is suitable for smaller, stranded gas fields.
But he says the technology is unproven and there are concerns when it comes to cyclones and plant maintenance.
“For us there is still some unanswered questions, including the safety case for extreme weather locations, and those locations for example, include high cyclone areas, frequent cyclone areas,” he said.
“It is unclear to us how these issues impact on the continuity of operations on a day to day basis … specifically the availability and reliability of these facilities when comparing these facilities to land based plants.”
Woodside Petroleum is planning to use the new technology to develop the Browse Basin gas fields off the north west coast of WA.
Cyclones are common in the area during summer.
Woodside and global energy giant Shell, which is developing the floating LNG technology at its Prelude project off the north west coast, have defended the technology saying it is designed to withstand severe weather conditions.
Mr Krzywosinski slammed the high cost of LNG projects in Australia citing research from business consultants McKinsey, which found that new Australian LNG projects were 30 percent more expensive than similar projects in Canada and East Africa.
That conclusion was recently disputed by economic forecaster BIS Shrapnel in a report commissioned by the Maritime Union.
Mr Krzywosinki told the inquiry that the development of floating LNG is an industry response to the high cost of gas projects in Australia.
“If the high cost environment is not addressed, then I suspect floating LNG will remain on the table for Australia,” he said.
The Chevron Australia boss says governments and industry need to work together bring down the costs of doing business here or risk projects going to other LNG producers such as the United States or Africa.
Mr Krzywosinki blamed the $9 billion cost blowout on Chevron’s giant Gorgon gas project off the north-western Australia on “country activity”.
He said the logistical challenge of building the project on Barrow Island, which is an A-class nature reserve, and weather delays, high wages for gas industry workers and low productivity, increased the cost of the project.
The Maritime Union of Australia blames the cost blowout and delays on mismanagement by Chevron and multiple tiers of management.
Last December, Chevron announced the expected cost of building Gorgon had increased from $43 billion to $52 billion.
It said at the time that the cost blowout was caused by factors including wages and productivity associated with Barrow Island site infrastructure, logistics challenges and weather delays.
Chevron also said that the high Australian dollar and currency impacts accounted for around one-third of the projected cost increase.
Mr Krzywosinski says Chevron will spend more than $50 billion on local goods, services and jobs on both its Gorgon and the Wheatstone natural gas projects.
More than 16,000 people are being employed to construct the two big resources projects and 1,600 people will work on the projects once they are completed later this decade.
The inquiry is looking at the economic implications of FLNG operations in WA and its impact on state revenue.
The committee’s report is expected to handed down by May next year.