BHP Changes its Tune on Floating LNG 1

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Monday, October 6th, 2014
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BHP has agreed to develop one of Western Australia’s biggest offshore gas fields using a floating LNG facility, in a further sign that Premier Barnett’s initial opposition to the technology has run aground.

The Scarborough gas field is set to become host to a floating LNG development after resources giant BHP Billiton gave its support to joint-venture partner ExxonMobil’s push for the technology.

BHP petroleum boss Tim Cutt told the West Australian that the company was now “fully aligned” with ExxonMobil after considering a range of technological options.

“FLNG is the direction we’re heading,” said Cutt. “We’ve got a lot of confidence in the technology.”

Tim Cutt

Tim Cutt

Cutt’s remarks come after years of speculation surrounding the development of one of Western Australia’s largest gas deposits, as well as remarks he made last year evincing a preference for the use land-based processing facilities that had already been built at Onslow, in contrast to ExxonMobil’s long-standing support for FLNG.

The Scarborough field harbours an estimated eight trillion cubic feet in dry gas deposits, although efforts to develop the resource since its discovery in 1979 have been hampered by its remote location in Carnarvon Basin, 220 kilometres northwest of Exmouth in water at depths of 900 metres.

FLNG is highly suited to the development of such remote offshore deposits. The technology involves the siting of traditional LNG plants on floating vessels instead of building them on land, enabling the facilities to be positioned directly above offshore gas fields for maximum convenience.

According to Cutt, the fact that gas in the Scarborough basin is dry should also further facilitate the deployment of FLNG.

BHP and ExxonMobil each hold a 50 per cent stake in a retention lease to the field which is set to expire next year, with the cost of their joint-venture FLNG project estimated at around $10 billion.

Other plans to develop FLNG projects in Western Australia have provoked intense controversy, with state premier Colin Barnett strenuously opposing the deployment of the technology at the Browse basin on the grounds that it would deprive the regional economy of jobs and gas supplies.

“If the project is offshore, there’s very few jobs for Australia,” said Barnett after reports emerged of Shell’s push for FLNG at Browse. “That’d be a disastrous result for Australia and Australia’s natural resources.”

The Premier’s stance has since softened considerably. At the opening of the 2014 Australian Petroleum Production & Exploration Association conference in Perth last April, Barnett said he had “accept[ed] the reality” behind the development of the Browse basin’s vast gas fields using FLNG.

Browse and Scarborough are far from the only offshore gas deposits in Western Australia that will be developed by means of FLNG, and the state is  set to become a landmark region for deployment of the technology.

Shell is spearheading these efforts, with Shell Australia’s former chairwoman Ann Pickard referring to the technology as the “saviour” of Australia’s LNG sector, given its ability to help ameliorate the country’s exorbitant operating costs. According to Pickard, Australian LNG is amongst the most expensive to develop in the world, and exports of product from the US and Canada to Japan are 20 per cent cheaper.

Shell is currently building the world’s largest floating structure to develop the Prelude natural gas field in the Browse basin, the deployment of which will mark the company’s debut use of FLNG.

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  1. Jarrod Maloy

    Like it or not, FLNG may well become the way many offshore oilfields are explored going forward.