Shell Expects Major Progress on Vessel for Australia's Prelude Floating LNG Facility by End of 2012

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Researched by Industrial Info Resources Australia (Perth, Australia)--Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands), Europe's largest oil company, is one step closer to moving liquefied natural gas (LNG) production offshore with its proposed $12 billion floating LNG (FLNG) project in the Prelude basin, off Australia's northwest coast.

The hull of the Prelude vessel is being forged for Shell by Samsung Heavy Industries (Seoul, South Korea), together with Technip S.A. (Paris, France), and is expected to be built by the end of the year. Once completed, it will be the world's largest vessel, six times the weight of the world's largest air carrier.

For more information, see March 22, 2012, article - Shell to Welcome Project Participant to Prelude FLNG Project in Australia, and February 7, 2012, article - Shell Takes Majority Share of Crux Natural Gas Fields, Plans Gas Supply to Prelude.

LNG production began 50 years ago and has been predominantly land-based. Major companies like Shell and GDF Suez (Paris, France) are now moving their production facilities offshore, to get closer to the gas field resources that have been identified over the last 10 years.

FLNG removes the costs of pipelines and jetties and uses about 50% of the raw materials required for an equivalent onshore plant. FLNG doesn't have the same degree of environmental regulation associated with onshore plants, and would shield companies from rising onshore costs--for example, the rising cost of labor in Australia.

Shell Development Australia (Perth, Australia) currently conducts detailed engineering for the Prelude project, and the entire FLNG facility is tentatively scheduled for completion by 2017. Once in operation, Prelude FLNG will produce about 3.6 million metric tons per year of LNG and 1.3 million tons of gas condensate per year at an estimated cost of $10.8 billion to $12.6 billion.

Following successful operation of the Prelude FLNG facility, Shell plans to deploy its technology further afield. Shell is already discussing plans for FLNG off Indonesia and East Timor shores. GDF Suez, operating as GDF Suez Bonaparte (Perth, Australia), plans to make a final investment decision by 2014 for its proposed FLNG project 300 kilometers southwest of Darwin, in the Bonaparte Basin of Australia.

Australia and Qatar take the lead as the world's largest LNG exporters. Global demand for LNG is expected to double by 2025, and analysts predict that by this stage, FLNG plants will supply about 3% of the worlds LNG, according to a forecast by Deutshe Bank AG.

Industrial Info is currently tracking seven large-scale LNG production projects under construction in Australia that have a total investment value of more than $171.27 billion. These projects, when in full operation, will increase Australia's LNG export capacity from about 24 million metric tons per year to more than 80 million metric tons per year.

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