ExxonMobil Corp. (XOM) laid out plans for a development using the world's biggest floating natural gas processing plant, in a technically challenging move that underscores its bullish view on Asian demand for the fuel.
ExxonMobil
Corp.
(XOM)
laid out plans for a development using the world's biggest floating natural gas
processing plant, in a technically challenging move that underscores its
bullish view on Asian demand for the fuel.
Exxon and partner BHP Billiton Ltd. (BHP) want to anchor a vessel extending 495
meters--the equivalent of around five football pitches--at sea to tap into the
remote
Scarborough
natural gas field offshore
Western
Australia
. They're seeking government approval for the
multibillion dollar project, and targeting first production as early as 2020.
Floating liquefied natural gas technology, known as FLNG, is untried but has
captured the attention of some of the world's biggest energy companies seeking
to access gas fields that are too small or remote to develop using pipelines
and onshore facilities. Royal Dutch Shell PLC (RDSB) is a leading proponent of
FLNG vessels, which it plans to deploy in
Australia
and
possibly elsewhere.
The relative calm of the waters off
Australia
's
northeastern coastline make the country a strong candidate to accommodate the
world's first FLNG vessels. Its stable political environment and proximity to
Asian markets that have a growing appetite for fuels that are cleaner than coal
when burnt are also drawcards. According to the International Energy Agency,
China's natural gas demand alone will more than quadruple to 545 billion cubic
meters between 2011 and 2035.
However, companies like Exxon need to ensure their vessels can withstand stormy
seas. One main concern is that the forces generated by liquefied gas sloshing
in partially filled containers can damage the storage system. That issue is
being addressed with containers designed to minimize sloshing and with
elaborate anchoring systems that limit the movement of vessels in the water.
Exxon's proposed facility would produce between 6 million and 7 million metric
tons of liquefied natural gas, or LNG, a year for several decades. The
Scarborough
resource was discovered in 1979 and is estimated to hold up to 10 trillion
cubic feet of gas--equal to more than a third of the
U.S.
's
annual gas consumption.
Early design work would begin next year, ahead of a final investment decision
in 2014-15, Exxon said in a filing to the federal government's environment
department. A Melbourne-based spokeswoman for Exxon wasn't available for
comment Tuesday. A BHP spokeswoman couldn't immediately comment.
With close to a dozen natural-gas export terminals planned for its coastline,
Australia
is
poised to leapfrog
Qatar
as
the world's top exporter of LNG by the end of the decade. LNG is natural gas
chilled to a liquid so that it can be shipped by tanker.
The industry, however, is facing increasing cost headwinds driven by a strong
local currency and a shortage of skilled labor. Underscoring these challenges,
Chevron Corp. and smaller joint venture partners including Exxon and Shell said
in December the cost of building their giant Gorgon LNG project on the Western
Australian coast had blown out by a fifth to 52 billion Australian dollars
(US$54.4 billion).
The budget overruns come as
Australia
becomes increasingly likely to face rising competition from emerging gas-export
industries in
North America
and
Africa
,
which could make it tougher to secure customers.
FLNG is often touted by company executives as a means of mitigating cost
pressures because much of the construction process occurs offshore in countries
with cheaper sources of labor. Companies also don't have to pay for acquiring
and clearing land.
"For some of the more economically challenged gas resources out there,
floating LNG is going to take on a much higher profile," said Andrew
Williams, a Melbourne-based energy analyst at RBC Capital Markets.
In 2011, Shell committed to use a FLNG vessel to process natural gas from its
Prelude field in the
Browse
Basin
offshore northwestern
Australia
. The
vessel is due to begin producing 3.6 million tons of LNG each year from 2017.
Shell estimated that its project would cost between US$3 billion and US$3.5
billion for every 1 million tons of production capacity, or between US$10.8
billion and US$12.6 billion.
In its filing Tuesday, Exxon didn't estimate a cost for its
Scarborough
development.
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