Australia Sanctions Shell's Prelude Floating LNG Project

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Researched by Industrial Info Resources Australia (Perth, Australia)--Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands) made its final investment decision on the Prelude floating liquefied natural gas (FLNG) project on May 20. The facility is the first in the world to produce and liquefy gas at sea, and will be 488 metres long and 74 metres wide.

A press conference was held on Friday afternoon to announce the sanctioning of the project. Speakers included Malcolm Brinded, Shell's executive director of Upstream International; Ann Pickard, Shell's Australia chair; Martin Ferguson, the Federal Resources and Energy minister; and Western Australia Premier Colin Barnett.

Brinded provided a visual perspective: "It will be largest, floating, off-shore facility in the world, longer than four football fields, or soccer fields, or three MCGs laid end-to-end. And we were looking at it just now and from the waterline to the top of where the facilities are, that's about 17 stories high." The vessel will weigh 600,000 tonnes and be moored in 250 metres of water, above the Concerto and Prelude natural gas fields, approximately 200 kilometres off the coast of Western Australia's Kimberley region.

Shell remained tight-lipped on exactly when they would sanction the project or state its cost, saying only that it would be sometime in 2011 and excluding publication of the project capital expenditure. The $10.53 billion figure in the news is an estimate broadly proposed by numerous Oil & Gas industry experts.

Shell was able to progress with the financial approvals after the final government permit for the Prelude FLNG project was granted on Friday morning. Shell had been waiting to acquire the production license from Australian government. Environmental permitting by the Australian federal government was granted on November 12 last year.

Martin Ferguson declared his expectation that existing Australian projects may be sufficient for Australia's needs; such projects include the Darwin LNG; and the North West Shelf joint venture from Gorgon and Pluto (in construction); the Browse LNG and the Ichthys, which are under development; and the multiple gas hubs out of Onslow in Western Australia and Gladstone in Queensland. During the press conference, Ferguson recognised the benefits of the innovative Prelude project to Australia and acknowledged the sanctioning of the project as being a landmark decision, demonstrating Royal Dutch Shell's faith in Australia as a country in which to introduce the Floating LNG technology.

The Prelude project is predicted to increase Australian GDP by $47.4 billion and generate tax revenues in excess of $12.64 billion.

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