Floating LNG Figures Fly in Face of Woodside Cost Claims 2

Wednesday, October 23rd, 2013
liked this article
ACIF 300×250
Floating Liquid Gas
FavoriteLoadingsave article

A state government inquiry into the use of floating liquid natural gas (FLNG) technology has concluded it will not confer significant economic advantage for the Browse LNG Project located off Western Australia’s Kimberley coast.

The Western Australian government’s economic and industry standing committee said the return on investment achieved via the use of FLNG would be between 12.5 to 13 per cent, conferring an edge of as little as one percentage point compared to the 11.5 percent ROI for onshore processing.

Fran Logan, deputy chairman of the committee, told a hearing in Perth that the figures came from an unreleased submission prepared by “a major organisation” involved with Browse, most likely either lead developer Woodside Petroleum, or joint-venture partner Shell, which already has extensive experience in the development of floating LNG facilities.

The committee was informed that although the upfront capex for floating LNG platforms would less than those of onshore processing facilities, the greater operating expenses for FLNG, including maintenance and supply for floating platforms, would offset this initial cost advantage.

The revelation would appear to belie statements made by Woodside Petroleum before a Western Australian parliamentary inquiry just last week, when it claimed that the cost of developing an onshore gas hub would have rendered the project commercially unfeasible.

This claim was backed by joint venture partner BP Australia, with Trevor Caldwell, BP general manager of Browse, stating repeatedly that the development of processing facilities at James Price Point was “not commercially viable.”

 Colin Barnett

WA Premier Colin Barnett

The issue of floating LNG versus onshore processing has been a point of protracted dispute for the Browse project, with Western Australian Premier Colin Barnett vehemently opposed to the former option on the grounds that it will deprive the state of the huge economic benefits and employment opportunities it would reap from the construction phase.

FLNG entails the use of less infrastructure than onshore processing facilities, while much of the construction work can be also outsourced to cheaper overseas locales.

Tensions over the project were renewed last week when Woodside executive director Rob Cole claimed the state government controlled only 5 per cent of the Browse gas fields, as opposed to the figure of 15 per cent touted by Barnett previously, which the Premier said would enable the Western Australian government to thwart efforts by the joint-venture partners to implement FLNG.

Perth-based Woodside previously incurred Barnett’s ire by abandoning plans to construct a $40 billion onshore plant at James Price Point in Kimberley, instead backing FLNG technology already developed by project partner Shell.

At the start of September Woodside confirmed that floating LNG technology would be used for the project, after obtaining the approval of all the joint-venture partners. Woodside would avail itself of Shell’s expertise in FLNG engineering to design the facilities, with a final plan to be selected in 2014.

Shell is currently involved in the construction of an FLNG facility in South Korea, which will be deployed at the Prelude gas field situated off the north-western coast of Australia. According to Shell Prelude will be a mere quarter of the size of its onshore peers, and capable of producing enough natural gas to meet the energy requirements of Hong Kong.

FavoriteLoadingsave article


 characters available
*Please refer to our comment policy before submitting
  1. Justin Price

    Putting aside the costs, what are the environmental arguments either way?

  2. Frank Watson

    Interesting. Would have thought floating technology would have been cheaper and almost certainly more environmentally friendly – albeit with it not delivering so much in terms of economic benefit to Australia.

    Notwithstanding this report, I would certainly think floating LNG will be increasingly popular for deposits which are far out at sea.